The Monetary Policy Committee’s (MPC’s) decision to hold interest rates will give mortgage borrowers a little more breathing space, say experts, but they warn homeowners should still prepare for a rise in the not-too-distant future.
Reece Beddall, sales and marketing director of lender, Bluestone Mortgages, said: “Although a rise in interest rates looked on the cards, today’s decision comes as welcome news to both prospective and existing borrowers.
“However, low-interest rates can’t last forever, and looking ahead, the challenge will be how we can best support the growing number of customers who find themselves in difficult financial situations.”
The MPC voted by a majority of 7-2 to maintain the base rate at its all-time low of 0.1%, which was set during the pandemic.
But while many analysts thought it was time for a rise to 0.25%, others agreed the decision to maintain the rate was sensible because there was so much economic uncertainty.
Indeed Hayley Scott of Investec Real Estate, said: “This feels like the right decision. The economy is still in recovery mode, and GDP is yet to regain all the lost ground from Covid.
“Importantly, the full impact of the end of furlough is yet to be seen and, despite the government’s insistence, the reintroduction of Covid restrictions can’t be ruled out.
“However, if the labour market holds up and the recovery does not stall, a first rate rise in the coming months is almost inevitable and will be increasingly necessary.”
How will it impact my mortgage?
According to the Guild of Property Professionals, over 80% of homeowners are tied to a fixed-rate mortgage, so any rise in rates either today or in the short-term future would have been unlikely to impact them.
For those on variable rates, however, there will a respite – at least until the next meeting of the MPC on 16 December. Experts said, even if rates had inched up to 0.25%, the increase in interest on mortgages would have been modest.
The noise surrounding the speculation this week that interest rates might rise has had an effect, however. Indeed, some mortgage lenders had begun to pull low-rate deals in anticipation of the decision.
Nicky Stevenson, managing director at national estate agent group Fine & Country, said: “Already, some buyers will feel aggrieved that, thanks to the large hints dropped of the past month, several high street lenders have jumped the gun and increased borrowing costs already.
“This has already begun to squeeze affordability and with rate rises a question of when, not if, borrowing costs are unlikely to revert back to what they were simply because of a small delay.”
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