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Bank of England Increases Interest Rate to 4.75% |
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The Bank of England raised the interest rate by 0.25% to 4.75% yesterday. The reaction has been mixed including some saying that the remortgaging activity may actually increase. The remortgaging has been a major factor in the release of capital to purchase properties on the Costa Blanca.
John Goodfellow, chief executive of Skipton, says: "Unless this rise has a more dramatic effect than the last, I'm sure we will see another increase in the not too distant future. This will represent good news for savers but will place further strains on households that continue to pile on the debt."
Michael Coogan, director-general of the Council of Mortgage Lenders, says: "The Monetary Policy Committee members have recently made a point of emphasising that it is not in the business of clobbering consumers. Equally, we all recognise that it needs to address inflationary pressures as it sees them. So the rate rise is no surprise.
"We continue to think there will be further rate rises to come, and that consumers should organise their finances to be able to cope with them. But we do not expect that the housing market will still be regarded as a significant inflationary pressure looking ahead into 2005. Nor do we expect that there will be a significant worsening in arrears and possessions figures in 2005 with the benign economic backdrop."
Jim Buckle, managing director of assertahome.com, says: "The main house price indices, many of which still show buoyant price increases, are well behind the curve and have not yet picked up these dramatic changes in consumer confidence. The rate increase was unnecessary for the housing market and the MPC should now hold its fire."
Lee Grandin, managing director of Landlord Mortgages, says: "The rate rise, when combined with other recent rate increases, may deal a temporary blow to buy-to-let landlords especially those with variable interest rate mortgages. However, we feel that buy-to-let investors can still make substantial gains by capitalising on these market conditions, especially if they hold off buying until the figures stack up.
"Landlords will find it easier to snap up bargains from sellers looking for a quick sale as there will be fewer buyers in the market. The rate rises coupled with inflated house prices will also be of benefit as this type of market encourages renting rather than house purchase resulting in higher rental yields and fewer void periods. We believe that if landlords take these factors into consideration and remember the basic principal of buy-to-let. "
Nick Booker of In2Perspective.com, says: "A rise in rates to 4.75% means Mervyn King has just snatched £1.25bn from UK homeowners pockets.
"If rates go above 5% the affordability of the property market will reach a point that it has never reached before without going on to crash. The London property market is now at breaking point and the rest of the country is close behind.
"The property market is about to cross a threshold that has previously only been passed in 1973, 1981 and 1989. All of those years are famous for the property crashes that followed."
RICS says there is little need for shock treatment for consumers as this would hit other parts of the economy. Rate rises have had only a muted impact on consumer spending so far as the overall economy is encouraging people to feel secure in their jobs.
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