To counteract the potential impact of the Brexit vote that happened in June, the Bank of England has cut its base lending rate from 0.5% to 0.25%. So what effect, if any, will this have on those looking to buy or already owning a home and how will it affect the government’s Help to Buy assistance scheme for property purchasers?
To answer those questions and others, one of the UK’s leading property portal’s What House? has looked at some of the issues raised by this interest rate cut.
How will the rate cut affect my mortgage?
The immediate effect of the rate cut should be cheaper mortgages. If you have a tracker mortgage, your lender is obliged to pass on the rate cut to you. However, with any type of variable rate mortgage it's less certain this will happen. The reason being that with variable rate mortgages, passing on the rate cut is at the lender's discretion. This has led the Bank of England putting aside £100bn for lenders to encourage them to pass on the cut. Even if the rate cut happens with your own mortgage, you may not see that decrease in monthly payments until later on in the year.
How will the cut in interest rates affect Help to Buy?
The interest rate cut shouldn't directly affect Help to Buy, and shouldn't have an adverse effect on the various Help to Buy initiatives available to you.
What does the rate cut mean for first-time buyers?
The main obstacle to most first-time buyers getting on to the property ladder is the soaring cost of house prices which means getting a deposit together is extremely difficult. The interest rate cut alone won't make that any easier. However, this is where Help to Buy: Equity Loan can be so helpful. In addition, once you are successful in buying your new home you can look forward to even cheaper mortgage rates. So, in effect, this cut is still encouraging news for first-time buyers.
Is now a good time to buy a house?
According to the latest survey carried out by the Royal Institution of Chartered Surveyors, over the next five years house prices will rise by around 3% nationally and 4% in London. A majority of surveyors (23%) also expect house prices to rise over the next 12 months. The interest rate cut should have some additional positive effect on the property market. As a result, the combination of Help to Buy with even lower interest rates is undoubtedly good news for those wanting to buy a new house. If you're interested in taking advantage of this present time you can find some excellent Help to Buy houses available across the North West. Otherwise, you can click here for more information about Help to Buy mortgages.