Thu 14 Jul 2016
Speculation has been rife for some days that a cut is on the cards from the already historically-low level of 0.5 per cent, which has been the norm for the past nine years thanks to the financial crisis. Now the additional cut is being advocated by some to cushion the effects of last month’s shock UK vote to leave the EU.
Bank of England governor Mark Carney has paved the way for a possible cut by making a series of statements since the referendum.
In one he warned borrowers buying homes that “conditions will be difficult” as a result of economic volatility. “If you are taking out a mortgage, at some stage, during the life of that mortgage, conditions will be difficult. You want to be sure, as a household or an individual, that you can repay that mortgage - you don’t want to lose your house or flat” he said.
This week he told MPs that the volatility could eventually mean that interest rates could rise as much as three percentage points as the Brexit discussions continue in future years.
However, there is growing consensus that the most likely immediate move is a further drop. A poll of financial advisers conducted by FT Advisers Advantage discovered that 74 per cent expected a cut in base rate in the near future, either to 0.25 or 0.0 per cent.
Today’s decision will be made at noon, but there is no guarantee that all lenders to buyers will follow suit, either immediately or in the longer term.
“There is a risk that the cost of mortgages may rise further down the line as banks seek to protect their margins. At the end of June the average quoted interest rate for a two-year fixed mortgage stood at 1.74 per cent at a lender’s margin of 1.24 per cent. This figure has been largely unchanged over the last 12 months, having progressively fallen over the preceding five years” says Lucian Cook, research director at Savills estate agency.
Source: Estate Agent Today