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Bank of England hikes base rate to 5%, highest level for fifteen years, more rises likely.
Despite Rishi Sunak stating that he was ‘on it’, as he hid away inside an Ikea warehouse, there seems no end to the woe for mortgage borrowers in the UK, as variable rates, two year fixed rates and five year fixed rates look to rocket further.
Yesterday most of the members of the Bank of England fiscal panel voted for a 0.5% hike in interest rates, with only two voting for no rise. This means that for some their monthly mortgage payments have increased by 50% in the the past 14-months.
If you add in the uptick in utility bills, cost of food and the economy rate of 8.4%, homeowners are going to really feel the squeeze. As are the 720,000 plus mortgage holders who will be looking to re-mortgage by the end of the year, and first time buyers eyeing rates of 6.3% or more.
With the housing market already slowing, this huge intervention by the Bank of England will be like a hammer blow to many agents, causing financial problems akin to 2008, and the depression triggered by the global bank failings.
The Chancellor says no return to MIRAS (mortgage interest relief at source) tax break, which was phased out in 1988.
Despite Liz Truss recklessly heightening the cost of borrowing for all in the UK by her short lived antics whilst in power, the Conservatives say their policy is for mortgage borrowers to tough it out.
It is widely expected that the Bank of England council will vote to raise the base rate tomorrow. Given that those looking to re-finance their mortgages face an extra £3,000 per annum hike, and new buyers can expect to be paying 6% plus, many had hoped the government would offer some financial aid.
Michael Gove Housing Secretary speaking on Sunday made it clear, it was down to the Chancellor, and Jeremy Hunt has said that inniatives like MIRAS, where borrowers get part of their monthly payments reduced by tax intervention, is not on the table.
For those who are old enough and can remember, until 1988, when MIRAS was repealed by Chancellor Nigel Lawson (which created a massive house price bubble followed by a stagnant market and falling prices for half a decade) those taking out a mortgage would only finance part of the loan. At that time interest rates were hovering around 11%, so different to where we are now in 2023.
Instead of taking any action, and many feel that there should be no intervention, Jeremy Hunt will the day after the Bank of England makes it decision on the base rate, meet with figures from the mortgage lending industry to see what can be done. The emphasis being put on lenders to sort out the mess caused by Trussanomics and continued high inflation.
The Guild of Property Professionals proudly recognises the exceptional achievements of its Members during its 30th Anniversary celebration and Awards ceremony held in London on 16 June 2023.
Kris McLean, Managing Director of The Guild of Property Professionals, expressed his enthusiasm for the event, stating, “Our 30th Anniversary and Awards ceremony provided us with an opportunity to commemorate the remarkable journey of The Guild over the past three decades and to honour the outstanding calibre of agents within our network.
From its inception, The Guild of Property Professionals has transformed into an award-winning industry leader and the largest independent estate agency network in the UK. Our success is primarily attributed to the exceptional Guild Members who continually strive to deliver exceptional customer service and uphold the highest standards of professionalism.”
The Proptech-X Weekly Roundup in association with Estate Agent Networking.
Andrew Stanton is the founder and CEO of Proptech-PR, a consultancy for Founders of Proptechs looking to grow and exit, using his influence from decades of industry experience. Separately he is a consultant to some of the biggest names in global real estate, advising on sales and acquisitions, market positioning, and operations. He is also the founder and editor of Proptech-X Proptech & Property News, where his insights, connections and detailed analysis and commentary on proptech and real estate are second to none.