BoE base rate rise – Experts react on impact for landlords

Property and finance experts have reacted to the news that the Bank of England has raised the base rate from 3.5% to 4%.

They highlight that the mortgage market has been preparing for the base rate increase by the Bank and have factored this into their product ranges.

However, landlords may find that the stress testing undertaken by lenders is much stiffer as a result.

In its report that explains the rise, the Bank says that the pandemic and rising energy prices have hit the economy.

The report also highlights that inflation will drop to 8% by June – and by the end of the year it will be 3%.

The Bank also says that the recession will not only be short than predicted, but also milder.

Many landlords coming to the end of fixed term products

Angus Stewart, the chief executive of Property Master, said: “With many landlords coming to the end of fixed term products this year, while there is still a significant increase in rate from their old, fixed term, it is still in their interests to look for a new mortgage product – either fixed or discounted – rather than go onto the lender’s SVR.”

He added: “Since the mini-Budget last year when we were seeing buy-to-let mortgage products removed from the market at an unparalleled level, most lenders have now returned to the market, and we are seeing increasing competition.

“The key challenge for many landlords is meeting the affordability requirements given the higher product rates resulting in tougher stress tests.”

Mr Stewart continued: “We again advise landlords to look to ensure that they are not sitting on the lender’s SVR and paying a premium.

“There are mortgage products available without early redemption fees and for those concerned about locking themselves into a fixed term this is a sensible option.”

‘Many of those on a tracker mortgage will still be on a lower rate’

Rightmove’s property expert, Tim Bannister, said: “It’s likely that many of those on a tracker mortgage will still be on a lower rate than most current fixed-deals even with this increase, so we’re unlikely to see any rush to fix from this group just yet, although with the gap between tracker and fixed rates narrowing it may prompt more people to see what’s on offer in the coming weeks.”

He added: “For those considering taking out a fixed mortgage deal soon, the good news is that this increase was widely expected by the financial markets and will have likely been factored into their plans.

“This means that we may see fixed-rate mortgage deals continue to edge downwards in the first half of this year, as some stability and calm continues to return to the markets.

“We’re still seeing buyer demand higher than the last normal housing market of 2019, indicating that people have the confidence to get on with their moves and if fixed deals do head further downwards this may encourage people further.

“We may see further increases in the base rate later this year but it’s difficult to predict how it will impact mortgage rates.”

‘4% may not be the peak for base rate’

Mark Harris, the chief executive of mortgage broker SPF Private Clients, said: “While 4% may not be the peak for base rate, it is unlikely to be far off.

“Fixed rates are influenced by future base-rate movements and therefore not directly linked to what is decided this week.

“Indeed, the pricing of fixed-rate mortgages, which soared after the mini-Budget, continues to drift downwards, with five-year fixes available from just above 4 per cent. It’s unlikely to be long before we see five-year fixes cheaper than base rate.”

Jeremy Leaf, a north London estate agent and a former RICS residential chairman, said: “The effects of the Bank of England’s base rate decision have seemingly been discounted by many homebuyers and sellers who are on fixed-rate deals which don’t expire for some time yet. But don’t get me wrong, those directly impacted by the change will know all about it in their repayments.

“The impact on house prices has been a reminder that negotiations can be tough if transactions are to happen as prospects are not exactly rosy.”

‘We are seeing challenges within the market’

Nathan Emerson, the chief executive of Propertymark, the UK’s professional body for estate agents, said: “We of course are seeing challenges within the market as the cost of people’s mortgage payments are in some cases a lot higher than they have been traditionally used to.

“However, due to the demand for homes continuing to outweigh the number of properties available, this is fuelling a more stable market.

“With Banks stress testing people’s finances for many years, arrears and repossessions aren’t drastically increasing and we are therefore seeing a levelling out of the market and a return to more normal levels of housing transactions.”

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