Interest rates cut

Interest rates cut

  • There is a long standing relationship between house prices and interest rates, with changes in base rates acting either as a stimulus or used to calm the market. Interest rates dropped below 5%, in 2001, fuelling house price growth. In 2008, once rates dropped below 4% it halted the price falls triggered by the GFC.

 

  • The Bank of England's decision to cut interest rates by 0.25 points will support the housing market through a challenging period. However, while mortgage costs will be kept low, we do not expect it to trigger additional price growth this time.

 

  • Over 80% of loans taken out in Q2 2016 are on fixed rates, as are around half of all outstanding mortgages, meaning that savings will not be passed on to many. For those who do benefit, the savings will largely be minimal. A homeowner with a £150,000 tracker mortgage at 2% over base will save just £19 per month. Those on interest only mortgages will see slightly larger savings of £32 per month.

 

 

 

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