Amongst a package of economic measure announced yesterday, the Bank of England has cut its base rate from 0.5 per cent to 0.25 per cent. This historic low will be welcomed by many, but just what impact is it likely to have for house buyers and investors?
If you have a mortgage or are looking to get one in order to buy, you’re in luck! The cut in interest rates is likely to improve the offerings of mortgage lenders, encouraging prospective home-buyers. And for those who are already on tracker mortgages, monthly repayments will go down. Both of these factors will help to maintain a healthy property market.
Lower cost of borrowing for businesses
For UK companies looking to grow, the ability to borrow at lower costs will certainly be a welcome thing. And this will be one of the main things that the Bank of England had in mind when it decided to go ahead with the rate cut. This is due to the fact that, generally, lowering the cost of borrowing tends to boost overall investment in firms and, in turn, encourage them to hire new staff – something that is key to ensuring economic stability.
Savings and investment
One downside of a rate cut is the impact on savers. The rock bottom interest rate makes it virtually pointless to hold your cash in a savings account. However, there are alternatives. Those with savings could consider putting funds into either an ISA or investing their money in order to get a lot more reasonable returns. And in the current climate, property is proving to be a lower-risk, higher yield investment option.
The cut has also resulted in the value of the pound reducing again, which makes investment in the UK property market even more attractive to foreign investors. At the moment property prices are 10% cheaper now when purchasing using Dollars or Euros, compared to just 1 month ago!
This combination of factors can only help to return confidence in the UK’s economic prospects. It may also quieten any concerns about the impact of the countries European referendum result.
According to Russell Quirk, the founder of property site eMoov.co.uk, “The Brexit result brought about sensationalist prophecies of a less stable housing market and, as a result, many would have been deterred from buying. However, today’s news should come as a reassurance that the UK property market is in a more than stable condition.”
“A cut in interest rates is the antidote for the post-Brexit worry and will, as a consequence, ensure that the UK economy continues to be underpinned by buoyant property prices.”
For more news on Brexit’s effect on the UK housing market, check out Is Foreign Investment in London Property Set to Rise?.