Today’s announcement by the Bank of England that interest rates will rise from 0.25 to 0.5% has not come as a surprise but marks a significant change in direction following almost a decade of record low-interest rates.
First Time Buyers who have purchased a property in the past 10 years have become accustomed to stable, low-interest rates and now need to prepare for the possibility of increased fluctuation in rates over the coming years. The announcement will also have an impact on a large number of tenants, as Buy To Let landlords re-assess their financial models and account for the possibility of further increases in the coming years. With many tenants already dangerously close to affordability limits, this could have a significant and damaging effect on the sector.
Nick Marr, Co-founder of property marketplace TheHouseShop.com stated “Today’s interest rates rise announcement may not seem like a substantial increase, but it is highly likely that this will be followed by further increases over the coming years as the Bank of England puts an end to the almost decade of record low rates. Many homeowners, especially First Time Buyers who have purchased properties during this period, will need to re-assess their mortgage repayment budgets and make plans on how they would cut costs should rates rise even further over the coming months and years.”