Thursday will see the Bank of England’s Monetary Policy Committee (MPC) decide on the future trajectory of interest rates, the first time the MPC have sat together since September’s decision to hold interest rates at the current level of 5.25% after fourteen consecutive hikes starting in December 2021.
Whilst these historic increases have had some positive impacts on the UK’s macroeconomy, with wages overtaking inflation for the first time in over three years, it’s difficult to ignore the plight of borrowers as mortgage-holders face record-high repayments and remortgaging falls to its lowest levels since 1999.
David Hannah, Group Chairman of Cornerstone Tax, the UK’s leading property tax advisory, calls for the BoE to continue its pause, allowing the market to recover slowly whilst new opportunities emerge for first-time buyers.
At a time when mortgage approvals have fallen to an eight-month low as more borrowers on fixed-term agreements choose to stay with their existing lender, many economists believe that the BoE will vote to hold interest rates at their current level.
In the eighteen months since the hikes begun, inflation has fallen from a high of 10.7% to 6.7%, as of September. Hannah argues that the focus of the MPC ought to be on first-time buyers, urging the BoE to continue to hold the interest rate at 5.25% as the property market begins to show signs of recovery and opportunities emerge for those looking to get on the property ladder.
In the months since the BoE’s initial decision to pause their cycle of interest hikes, many high-street lenders have acclimatised to the period of stability. A majority of the UK’s largest mortgage lenders have started slashing their rates for first-time buyers, with Halifax offering five-year fixed mortgages at less than 5% whilst house prices continue to fall. Hannah asserts that these opportunities will only become more ubiquitous as the interest rate remains constant, gradually lowering as the market slowly recovers.
Chairman of Cornerstone Group International, David Hannah, said, “In the months following from the Bank of England’s decision to hold interest rates at 5.25% we’ve seen a gradual emergence of opportunities for first time buyers, giving mortgage lenders and banks the time to suitably adjust their operations. Subsequently, this has allowed for a flurry of new products to enter the market.
“Whilst the market conditions may not be optimal today, if rates remain where they are and hopefully even start to fall, we will see continued growth in the number of first-time buyers taking their first step on the housing ladder.”
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