The Bank of England’s Monetary Policy Committee (MPC) has today held its Base Rate of interest at 0.5% once more, in the wake of a slowdown in the housing market.
Base rate was widely expected to increase at some point in 2015, however a slowdown in the economy with stuttering growth and a period of deflation put paid to any fears of a rate hike last year.
Now, it appears that forecasters do not expect this to change for the foreseeable future.
“With weak inflation continuing, and the uncertainty around the UK’s economy with the forthcoming referendum on the nation’s fate in the European Union, it is absolutely not the time to be increasing interest rates” said Andy McBride, Business Development Director at Contractor Mortgages Made Easy.
“The Consumer Prices Index did increase in March to 0.5%, however this remains well below the government target of 2%. This means a double edged sword for the nation’s borrowers”
“Those with significant savings reserves will no doubt be feeling the pinch on interest rates, with returns worse than ever before. However, those with mortgage lending linked to Base Rate will be delighted with today’s news.”
As buyers rushed to beat the 1st April deadline for an increase in Stamp Duty on second homes, April saw a dip in activity in the market, with prices actually reducing by 0.8%, according to research by the Halifax bank.
House price growth slowed overall to 9.2% compared to the same period last year, with prices rising throughout March by 10.1%, largely due to the Stamp Duty deadline of 31st March.
165,400 properties changed ownership in the UK in March prior to the deadline, 11% higher than the previous peak prior to the credit crunch.
As a result, there are some unheralded price reductions on mortgage lending available in the market, as Andy explains.
“Given the relative health of the mortgage market throughout quarter 1 of 2016, many lenders are looking to make hay while the sun shines by tweaking their rates for the better”
“The great news for contractors is that several lenders that we are working with very closely have not just matched other banks, but in many cases exceeded their rate cuts.”
Contractor friendly lenders, Nationwide and Skipton Building Society, have both reviewed their rates of late, with reductions in fixed rates by up to 0.34%.
“Skipton are a lender who we have worked with for many years, pioneering market leading rates for contractors. With their recent review of their product range, buyers can obtain a fixed rate of just 2.85% at 90% loan to value, unrivalled in the marketplace”
While buyers can presently achieve unheralded value, this may not be the case for long, says Andy.
“This is excellent news, however the way that banks leverage products such as these are to allocate a tranche of funds to each deal. That means you can easily miss the boat as once it’s gone, it’s gone. Missing that particular ship could cost many thousands of pounds in additional interest.”
Article By: Simon Butler, Associate Director at Contractor Mortgages Made Easy
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