Property & Mortgages

House buyers in the U.K. may have until next year before mortgage rates rise again

mortgage rates rise

Bank of England held interest rates steady at its September meeting, and experts say they might not rise again until spring

The Bank of England held interest rates steady at 0.75% at its monthly meeting, the central bank said on Thursday.

The Monetary Policy Committee voted unanimously to keep rates steady following a 0.25% hike last month on the back of positive economic data. Following the announcement, economists predicted the bank will likely wait to raise rates—which directly affect the cost of home mortgages—until next year.

Very low mortgage rates have been integral to moving the British housing market recently, as low-cost borrowing has incentivised home buyers amid a general slowdown and allowed them to cope with rising home prices outside of London.

Analysts at Pantheon Macroeconomics believe the committee will hold off on raising rates until parliament signs a withdrawal agreement from the European Union, said Samuel Tombs, chief U.K. economist at the firm in a note on Thursday. He said May 2019 remains the most likely date for the next rate hike.

That bodes well for home buyers and owners looking to take out a mortgage in the next few months, as the cost of borrowing holds steady for the short-term, at least. The August rate increase had only a slight effect on long-term variable rate mortgages, which ticked up to 1.75% in August from 1.73% in July, according to Pantheon.

At 0.75%, the bank rate is now the highest it’s been since March 2009. When the bank does decide to lift rates to 1%, it will be the first time many borrowers ever experience rates that high, according to property consultancy Knight Frank.

Since March 2009, home buyers and owners took out roughly 1.2 million variable-rate mortgages on the presumption of steady long-term rates, according to Knight Frank.

The firm said in a note in August that many of those borrowers will now be wondering how steep the rate hike curve will be. Knight Frank and other lenders are suggesting buyers lock into fixed-rate mortgages to protect against future interest increases.

Until Brexit negotiations are finalised, however, the central bank is unlikely to rock the economic boat with another change to the base rate, experts say.

U.K. chief executive at personal finance site finder.com, Jon Ostler said in a statement the latest decision hasn’t shocked anyone. Their panel of eight leading economists all expected this and don’t envisage another base rate movement in 2018, with Brexit negotiations reaching a crucial stage.

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