Bank of England freezes base rate: How does this affect property buyers?
The base rate of interest is of special interest to property buyers in the UK. The latest decision from the Bank of England’s Monetary Policy Committee has frozen it at 5.25% for the second time in a row.
It is thought that a combination of cooling wage inflation and sluggish economic growth led to this decision. In addition, inflation has remained higher than the Bank would like and therefore Andrew Bailey, the governor of the Bank of England, has said that it is much too early to consider cutting the rate.
However, the fact that it was not increased can be viewed as a positive sign and an indication that we are at the peak right now. The next review will be held in December and industry experts are cautiously optimistic that we may see a slight rate cut before Christmas.
From the perspective of property buyers in the UK, what does the rate freeze mean?
Fundamentally it means that very little has changed and that the current economic pattern has continued. The most relevant factor is that this means mortgage rates are likely to remain at their current relatively high levels – higher than they have been in recent years but still below the historic average over the last two decades.
People buying with a mortgage now will therefore likely have to pay a higher rate than they will in a year or more. This is a reality which has led many to question whether they should buy now at all or wait to buy in the future.
It’s a fair question, but the solution is obvious. If you want to invest in UK property but also want to avoid higher mortgage rates, it pays to buy off-plan. By doing so, you can lock in a below-market price now, but push the majority of payment into the future when mortgage rates will be lower again.
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The Bank of England will continue to monitor the economy, and as the cost of living crisis begins to ease in 2024 we can anticipate that rates will decrease again. When they do, mortgage rates will begin to fall and demand for properties will increase – pushing up prices.
This is a great opportunity to buy residential property in the UK and get the best of all worlds by going off-plan. Get in touch with our team today to discover our available opportunities by clicking here.