Base Rate has not moved in 5 years

The Bank of England’s Monetary Policy Committee (MPC) has held the Base Rate at 0.5% which means the rate has been at this level for more than 5 years.

The MPC vote to keep Base Rate at 0.5% was unanimous, however the case for an increase is becoming more likely in the not too distant future.

The minutes state: “The Committee agreed that no increase was warranted at this meeting, although for some members the decision had become more balanced in the past few months than earlier in the year.”

Many economists would say that a small rise in Base Rate is unlikely to ‘derail’ the economy’s improving state.

Earlier this year, Barclays Mortgages released a ‘Financial Flexibility’ report which aimed to quantify the impact on mortgage borrowers should rates rise, as predicted, by the end of 2015.

Taking data supplied by the Centre for Economic and business Research (Cebr) they have published potential scenarios for rate rises over the next 23 months.

The most moderate scenario predicted the Base Rate would rise 3 times in the period and would stand at 1.25% by December 2015.  The most drastic model suggests 5 rate rises taking base rate to 1.75%.

What impact does this have on borrowers?

Based on Barclays predictions, and using their average Scottish mortgage repayment figure of £556 per month and applying their ‘moderate’ model, monthly payments would increase by only £18.  Using their ‘drastic’ model, borrowers would see an increase of £39 per month

Planning ahead

Whilst any increase in mortgage repayments may put some home owners under a degree of pressure, what Barclays predictions show is that even in their worst case scenario, for many, interest rate increases may be very affordable.

Quantifying the likely outcome of interest rises over the next 23 months will help many home movers put the extra cost into perspective and help them budget more accurately.

Thinking of moving?

With interest rates still at an all-time low and prices in Edinburgh and the Lothians fairly stable, now may be a good time to consider making a move.

For a no obligation consultation about the dynamics of the property market, why not make an appointment with us to find out how we can help you plan your next move.