Taylor Scott International News
The surprise decision by the Bank of England not to announce a cut in the UK’s already historic low interest rates is unlikely to have much impact on the property market with some experts believing it could boost real estate. Even if the bank rate had been cut to 0.25% from 0.5% there would have been little room for improvement, according to David Whittaker, managing director of Mortgages for Business, who pointed out that mortgage rates are already at record lows and there is little room for them to go much lower. ‘Inter lender competition has played a significant part in this and with yields on swaps and UK gilts remaining near record lows, mortgage borrowers will continue to benefit from enhanced affordability for some time. Property investors with sound financial planning and a long term outlook are therefore well placed to take advantage of continued generous pricing,’ he said. ‘Property prices could be a little bumpy in the short term and the Monetary Policy Committee has highlighted a weakening of activity in the housing market. This might trim some short term capital gains on offer but in the long term, the outlook for investors remains positive. Supply of housing in the UK remains significantly out of sync with demand which will support price increases over coming years. Furthermore, high levels of demand for rental accommodation will provide landlords with strong yields,’ he added. Lucian Cook, Savills UK head of residential research, explained that the two year fixed rate has already levelled out. ‘We may now see lenders margins edge up. However, this is likely to be no more than a squeeze on affordability for mortgaged home owners, suggesting that what happens to the housing market in the short term will have more to do with sentiment than the cost of debt,’ he said. ‘The cost of borrowing will become more important once we see the economic impact of the decision to leave the EU, but for now the Bank still has the option of reducing rates up its sleeve,’ he added. ‘A greater level of political stability following the appointment of the new Prime Minister probably helped to steer the decision to hold interest rates, according to Andrew Burrell, head of forecasting at JLL. ‘This can also be taken as a move to reassure the market that the Bank will not take knee jerk reactions and will remain calm under pressure. The market itself is also operating at low rate levels which may have removed the urgency to cut rates this month,’ he pointed out. ‘Indeed, interest rates continue to soften along the yield curve with most maturities at record lows. A cut shouldn’t be ruled out in August, however, after the market has been given more time to adjust and longer term sentiment is clearer,’ he concluded. Adam Challis, head of residential research at JLL, pointed out that even if there had been a cut… Taylor Scott International
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