The Bank of England has cut interest rates for the first time in four years. In a closely-run decision, rates were lowered from 5.25% to 5% on Thursday, marking the first cut since the start of the pandemic in March 2020. This decision, described by the Bank’s governor Andrew Bailey as “an important moment in time,” aims to provide relief to borrowers and boost economic activity. Great timing to reach out to Value Invest and learn how you can benefit.
The Bank of England has cut interest rates for the first time in four years. In a closely-run decision, rates were lowered from 5.25% to 5% on Thursday, marking the first cut since the start of the pandemic in March 2020. This decision, described by the Bank’s governor Andrew Bailey as “an important moment in time,” aims to provide relief to borrowers and boost economic activity.
The property industry is responding positively and experts believe that this cut will help bring down mortgage rates and will enhance this dynamic’s market performance even more.
Ben Thompson, deputy CEO of Mortgage Advice Bureau, says many experts were split on whether interest rates would be cut.
He said: “This decision could’ve gone either way, but the Bank of England has rolled the dice and now finally has sufficient confidence to cut rates for the first time since 2020.
“For homeowners and those who’ve been looking to get on the property ladder, the past few years have been tough, but there are signs of it already changing. Rates on mortgage deals have been falling, and it’d be feasible that more cuts will follow. For those looking to buy, now is the time to seek advice and get mortgage ready.”
Nathan Emerson, CEO of Propertymark, said: “Today’s rate cut is excellent news for the housing market and no doubt a huge sigh of relief for those who have felt the pain of higher interest rates for the last two years. With a new government in power that is committed to delivering nearly two million new homes, Propertymark hopes today’s news is a real turning point for homeowners and those who aspire to buy.”
–
–
Andrew Bailey, Bank of England’s Governor, was asked by reporters if the interest rate cut was “one and done” – that is, will there be no more cuts after this?
He said that “he has no view on the path of rates” and that “the Bank would decide from meeting to meeting”.
Although on Thursday, financial markets predicted that there was a 75% chance the Bank would cut rates again in November, after the Labour government holds its first Budget at the end of October. Mark Harris, chief executive of mortgage broker SPF Private Clients, says the Bank of England will now have to decide whether to cut interest further.
He said: “Finally, the Bank of England has made its much-anticipated move and cut interest rates from a 16-year high. This will give borrowers an affordability boost, ease pressure on household finances and in doing so, assist the wider economy.”
Also, in his words “Even if the new Labour government manages to magic up an additional 300,000 homes this year, there is still a serious affordability issue for first-time buyers. Any base rate reductions will be passed on via lower standard variable rates and to some extent headline rates, which will have a positive impact on borrowing boundaries.”
The next question is when the Bank will reduce rates again, and whether we will see another cut in September or November. From our side at Value Invest, we think that new reductions are soon to be coming.
The reduction in the interest rate directly leads to lower mortgage rates. With lower interest rates, the increased demand for properties often causes property prices to rise quickly. Investors and homebuyers alike will be more willing to purchase, with investors anticipating capital appreciation. Cash flow is also affected, which is good news for investors. Low interest rates result in low mortgage payments, which in turn increases monthly cash flow and creates a positive ROI.
It also means investors have the chance to re-mortgage their investment properties, reducing their monthly mortgage rate and increasing cash flow that way. For buy-to-let investors, for example, this will automatically increase their profit by reducing their monthly mortgage.
Richard Pike, chief sales and marketing officer at Phoebus, said: “The 14 consecutive increases in the Bank’s base rate between December 2021 and August 2023 to its year-long fix at 5.25% have driven up mortgage rates tremendously with a negative impact on the UK property market and the economy. That the Monetary Policy Committee has now seen fit to reduce the rate is extremely encouraging for both the property market and the UK’s economic outlook. Things are finally looking up for originators, and we can expect to see lenders reducing existing borrowers and new business rates fairly quickly. Expect competitive pricing in the market across all products moving forward.”
Investors often try to time the market, for good reasons. However, as shown on this chart, over a 30-year time horizon, prices always tend to go up, therefore instead of timing the market, investors should consider time in the market.
We’re looking at a prime time to invest. With the rate cut down, investors can now secure more favorable mortgage terms, boost their cash flow and rental yields. The reduction also means a greater economic stability for the U.K. and the ongoing high demand in the housing sector combined with supportive government initiatives creates an ideal opportunity for property investment.
The potential for enhanced cash flow, improved ROI, and supportive government measures make this an attractive time for both seasoned and new investors. At Value Invest, we are committed to helping you navigate these changes and capitalize on the current market conditions. We offer fully managed property investment opportunities across the UK.
If you are seeking income-generating Buy-to-Let properties, it’s important to stay informed about the latest trends and opportunities.
Your path to wealth begins here! Contact Value Invest today to arrange a 1:1 call.
Continue reading interesting articles:
Why You Should Invest in the Fast Growing London Commuter Belt of England
© 2024 VALUE INVEST ALL RIGHTS RESERVED
© 2024 VALUE INVEST
ALL RIGHTS RESERVED
