Home buyers in UK set to benefit from continued low mortgage rates during Brexit negotiations

Home owners and would be first time buyers are unlikely to see mortgage rates rise in the short term, according to experts who say the Bank of England monetary policy committee report signals unlikely change due to Brexit negotiations.

The committee’s report says that is expects the economy to slow down during the difficult Brexit negotiations that lie ahead in the next two years with the formal triggering on the process now expected in the first week of March.
Members unanimously chosen to keep interest rates at 0.25% despite the Bank of England upgrading its forecasts for growth to 2% for 2017 and slightly increasing its expectations for inflation which it now believes it will peak at 2.8% in the first half of 2018.

‘Sterling weakness is pushing inflation higher but interest rates are likely to stay close to zero while EU exit negotiations are under way,’ said Trevor Greetham, head of Multi Asset at Royal London Asset Management.

According to Ishaan Malhi, chief executive officer of online mortgage broker Trussle, the Bank of England appears to be adopting a ‘wait and see’ approach to interest rates, refraining from any hike until it’s certain consumers and businesses can handle one.

‘This is great news for hopeful first time buyers, who are being given more time to take advantage of extremely low mortgage rates as they climb onto the property ladder. The Bank of England’s strategy should also be welcomed by existing mortgage holders looking to switch to a more suitable deal,’ he pointed out.

He explained that there are currently three million UK home owners on a standard variable rate mortgage, paying an average of £3,500 above the leading market rate every year on their mortgage and that remortgaging should still be a priority for them.

Continued low rates should boost both UK buyers and sellers, as well as the wider economy and it means that overall housing stability seen throughout 2016 should carry on well into 2017, according to Russell Quirk, eMoov chief executive officer. ‘With interest rates remaining as they are, the wider availability of affordable mortgage rates should further encourage potential buyers that now is as good a time as any to get that first foot on the ladder,’ he said.

‘Some may even argue that a slight cooling in property values across the nation isn’t such a bad thing and will further aid struggling buyers and help to partially address the growing housing crisis in the UK, although those already on the ladder may not share such a view,’ he explained.

‘But a word of warning, those looking to buy should still do so wisely and not be encouraged to buy beyond their means due to today’s further rate freeze. It is inevitable that at some point, interest rates will increase and the rate being enjoyed currently could increase to 3% or 4%. Should this happen, those that are ill-equipped to deal with the escalating financial costs, will find themselves in a very tough predicament,’ he added.

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