Most estate agents have tried to dismiss the impact of the Bank of England’s base rate rise, which came following a unanimous vote of the Monetary Policy Committee.
The increase from 0.5 per cent to 0.75 per cent was the first since November and takes based rate beyond 0.5 per cent for the first time since early 2009.
“While the end of this golden period of great mortgage deals won’t be a surprise to the vast majority of prospective and current homeowners, many have become accustomed to a decade of low rates. Homeowners on variable rates will finally see their average mortgage payments rise, which combined with higher inflation will mean that some households start to feel the pinch” explains Nick Leeming, chairman at Jackson-Stops.
David Westgate, group chief executive at Andrews Property Group, says many borrowers on fixed rate mortgages are protected against the move. “In terms of property values, irrespective of today’s news, we are already seeing a natural adjustment in pricing across many of our operating areas and this is quite simply because property costs are related to affordability.”
“The rise of 0.25 per cent will be largely insignificant to the typical borrower and should not have a meaningful financial impact. We all know that lenders’ affordability calculations and lending restrictions over the past few years have verged on draconian, and this has meant that borrowers can tolerate some movement in rates without any real threat. The cost of borrowing remains exceedingly low and is still amongst the cheapest since records began” insists Rob Clifford, group commercial director at property specialist SDL Group, franchise holder for Century 21 agencies in the UK.
London estate agents are already coping with a difficult market.
“Rates are continuing to rise steadily. This could be a positive boost for those who have been thinking about moving or wish to re-mortgage as they may decide to do so now, while rates are still very low. For our super high net worth clients, we don’t expect that this will have any impact as many are cash buyers or are not concerned with marginal changes to the bank rate” explains Martin Bikhit, managing director at Kay & Co.
Former RICS residential chairman and north London estate agency Jeremy Leaf is less sanguine about it.
'It’s not the relatively modest increase in interest rates which is significant - the message it sends about their future direction is far more important. The change is likely to compromise already fragile confidence to take on debt in the property market and wider economy. On the other hand, if we weren’t experiencing solid growth in employment, wages and consumer spending there would be no need for the rise” he says.