Rate rise could produce greater yields
As you are probably aware, the Bank of England voted 7-2 in favour of an interest rate rise for the first time in several years in recent weeks. This perhaps marks the beginning of the end of a record period of low interest rates, even though the rise only sees rates increase by 0.25% to 0.5% overall.
Deciding on the rise the Bank said: ‘All members agree that any future increases in Bank Rate would be expected to be at a gradual pace and to a limited extent.’ So what are the expected outcomes and consequences of this rate rise for the property market across the UK? Well, Paul Dossett, head of local government at Grant Thornton, said the rates rise could: ‘potentially produce greater yields from some of the new type of investment, which is which is vital to help support general fund balances. But it also poses a risk and raises questions around future borrowing rates as many councils will need to borrow in order to help boost housing supply in their areas’.
So will the rates rise really have a positive effect in yields? That remains to be seen but here’s what we do know. After years of rates being at their lowest ever level, it has been a good time to borrow money and lock in mortgage deals. This first rise in many years indicates that this record breaking stretch might be coming to an end. So, when it comes time to remortgage, borrowers are looking at likely increase in repayments. Which explains the run on mortgage brokers in recent weeks attempting to lock in favourable terms for fixed deals. It looks likely that repayments will go up however it is important to remember that the rate remains incredibly low, at just 0.5%.
The Bank of England has already stated that any further increases will be gentle in order to avoid creating a panic in the property market. On the flip side, the slight increase is good news for savers but at such small margins, property still represents the best value for money. With yields of 4, 5, 6% or more available, and the chance these may increase with rates rises, property is still a very good place to put your money.
To find out more about the rates rise and the likely effect this will have on the Norwich and Norfolk property market, get in touch with our team at Agile.
This article first appeared on A-PP.co.uk.
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