First BOE rate increase in over 10 years
The BOE rate increase from 0.25% to 0.5% may seem small, but it marks the first rise in borrowing costs for a decade. Many mortgages will rise in cost, but savers will be looking forwards to slightly better returns.
What does the increase mean for you?
This long period of low interest rates is bad news for savers and in some cases has caused them to seek riskier investments for a better return.
It seems that property is a safer investment option with this announcement.
For those saving to pay a deposit on a future home, the interest rate rise will be helpful. They will not have to save for longer and this will increase the number of first time buyers acquiring their dream home.
The Bank Rate rise will increase borrowing costs for households and businesses. As oppose the the last rate cut where some lenders were reluctant to pass this on. Rest assured they will be passing on today’s 0.25% rate increase. Which will increase monthly outgoing by approximately £22pcm on a £175k loan.
For those on fixed rate mortgages today’s BOE rate rise will be of no consequence…
With interest rates still relatively low we may begin to see a spurt of re-mortgaging with home owners taking advantage of the cheaper borrowing.
Like home owner’s investors will feel the rate increase if they on tracker, discount and even standard variable rate arranged mortgages. As far as future mortgage applications are concerned investors will be more concerned if highly geared (high LTV). As well as the issue with the BTL changes that came into force last month.
Investors will be hoping the banks do honour rate and even loan to value (LTV) levels to leverage their positions better.
The higher interest rates and reduced unemployment makes it a great time to buy and shows confidence in the economy. This will boost the economy and encourage a renewed confidence in building firms to ramp up the creation of new builds.
We’d like to know your thoughts on today’s historic decision… Please comment below.