Biggest rate increase in 27 years? Let’s look at the facts!
The tabloids are trying to scare people that this is the biggest rate increase in 27 years, let’s look at the facts…
The Monetary Policy Committee (MPC) meets every 6 weeks to discuss if the base rate should go up or down.
The base rate was previously reduced to 0.1% on 19 March 2020 to help control the economic shock of the coronavirus pandemic.
Rates during these months, rates stayed historically low. This was done by the MPC to stimulate the economy as the rates influence: credit cards, loans & savings accounts along with mortgages.
Inflation is high as it is measured against what was happening during the pandemic & the war in the Ukraine has upset energy markets.
Most predicted a BOE increase of 0.5% – we still expect more this year with a rise to 2.5% by December.
The Bank of England predicts that inflation above 2% in two years time will be a thing of the past and therefore interest rate rises won’t need to continue.
BOE base rates in Dec 2008 were 2% and in Jan 2009 were 1.5% so we are at a similar position to that recovering market.
If you are buying right now or considering buying in the future this shouldn’t concern you, house prices will continue to rise at a slightly slower pace.
Stock is not keeping up with demand, and new homes being built are not matching the number required. With this news you will be paying more for a home in years to come than you would right now.
In Worcestershire, over the last five years, average property values have increased by 18% .
If the same happens over the next five years, and interest rates stay the same, the value in bricks and mortar will be growing twice as fast as the cost of money.
Home buying is an aspiration for many and not affordable to all. Ensure you check your affordability to include your lifestyle and the increasing energy bills.
Stretch to what is comfortable – you will not regret it in the long run.