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Nick Garrett

nick@huttonsandpartners.com

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The Bank of England raised interest rates by 0.75% in November, bringing the current base rate to 3%. This was the largest single increase in 30 years, and took interest rates to their highest point since 2008. The Bank of England warned the UK is facing its longest recession in 100 years

What prompted the Bank of England?

In simple terms: increasing the interest rate is an attempt to control inflation. A base rate increase means banks will increase how much they charge on loans, and how much interest they offer on savings. Therefore, this encourages people to save money, rather than spend it. The hope is if people spend less on goods and services overall, then the price of those things will rise more slowly, which means a lower rate of inflation.

Does it affect you as a homeowner or tenant?

Yes. The Bank of England base rate affects many existing and new mortgages. Expectations are homeowners will face much higher mortgage repayments over the coming years.

As much as 80% of UK mortgage borrowers (8 million households) are currently on variable, tracker or short-term fixed rate mortgages of up to 3 years. These will be directly affected by the interest rate increase, with higher monthly payments

One of our clients in east London told me yesterday her mortgage will rise from £400 to £1,000 / month! (The BBC quoted a similar example)

As a tenant, your rent will likely also be increased as landlords look to cover their increased mortgage payments

What are your options if you are financially impacted?

As a homeowner, one option may be to consider a move to a more affordable home, or area. Selling your home and downsizing would free up capital and protect you in these challenging times. Effectively, you would be future proofing your financial position

Rent your property out. The rental market is the strongest it has been in years. We are currently renting properties within 3 days of being on the market, on average at 10% above asking price. Some of our clients are renting their London property, and living outside of the city, where rents are significantly lower

For guidance or advice, I’m always available: nick@huttonsandpartners.com

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