As we are familiar with the current news which is taking UK by storm - Mark Carney of Bank of England says interest rates will be held until unemployment falls to 7% unless price and financial stability were threatened.
We at Property Investor Show have had the chance to get the view of some of the experts who will be exhibiting at our next show on 11th-12th London Excel regarding this and here is what they had to say.
Joshua Elash - Director of MT Finance comments as follows: At MTF we find the recent announcement by Bank of England governor Mark Carney that interest rates will be held until the jobless rate has fallen to 7% or below both highly pragmatic and responsible. There has been a great deal of underlying anxiety in the property market as to when interest rates may increase, and the likely consequences of any increase, with many analysts predicting that even a nominal increase in the base rate would push a large percentage of households and investors in the U.K. (who have variable rate mortgages) into financial difficulty. Such results, in addition to adversely impacting upon the real economy, would lead to a new wave of mortgage defaults, in turn further restricting liquidity in the high street lending market. The Bank of England's approach ensures a vicious cycle is avoided. With zero wage inflation, the tentative signs of recovery need to be carefully nurtured. This strategy affords the time and breathing space for the economy to get back on its feet, and acknowledges the necessity of a direct correlation between the heath of the real economy and that of the banking sector.
Here are the views of Matthew Fleming-Duffy who is Mortgage and Finance Broker at Cherry Mortgage & Finance Ltd
Yes, with the unemployment rate at 7.8% and the BofE predicting that this will not drop below the threshold 7% until late 2016 we should be cautiously optimistic about mortgage rates staying low until this time. The main reason for the policy statement was to send a message to the money markets as swap rates have drifted up over the last couple of months, pushing some lenders to increase their mortgage rates. These changes are generally seen as being counter-productive to the Government-led efforts to establish stability in the wider economy, the mortgage market and therefore to house prices.
We live on a densely populated island with a housing shortage and many people cannot, or do not want, to buy. Professional landlords or private investors are essentially ‘picking up the slack’ where local authorities cannot fulfil the need to house individuals or families appropriately. The UK remains a good place for property investors and speculators to make sound purchases and it is good to see the Government and the BofE joining up policy and rhetoric to maintain house price growth and stability in the mortgage market.
Duncan Kreeger, director of peer-to-peer bridging lender West One Loans, comments,
For the property market overall, the Bank of England’s decision to hold interest rates will give buyers more confidence when considering investments. It’s as about as much security as we could expect during a period of economic recovery. But like all promises, it comes with caveats attached - and if inflation rises too sharply, the deal could be off. It’s good news for property investors, as low interest rates will likely keep house prices rising. In such a bombastic property market, returns could outpace inflation by even more than we thought. According to the Bank of England’s own projections, higher interest rates may not be introduced until 2016, rather than this year as some were expecting. The markets are undergoing a serious shift in expectations.
But there will be down-sides too. It’s a bad sign in itself that Mark Carney still thinks we need such extreme measures. The economy might be finally heading in the right direction – but it’s still straining in first gear. Equally, it’s not clear how keeping rates so artificially low will attract more money to the UK markets. That’s why this will be a particular boost for alternative lenders who can cut out the money markets. For example peer-to-peer models can deliver more cash for vital projects at the same time as delivering decent returns for investors.
Commenting on the announcement, Residential Mortgages Managing Director at Aldermore, Charles Haresnape, said:
“Today’s announcement is welcome news for homeowners, providing some much-needed guidance from the Bank on where rates are going.
“Whilst nothing is ever certain in today’s economic climate, given forecasts suggest it will be 2016 at the earliest before rates rise, homeowners will be looking more closely at longer-term fixes or to choose a tracker for the foreseeable future.”
Karen
Bennett, Sales and Marketing Director, Commercial Mortgages at Shawbrook Bank
comments:
Mark
Carney’s decision will undoubtedly give a boost to the property investor
market.
The
certainty of fixed rates will be welcomed by those property investors looking
to guarantee their costs for a set period of time. That said, the option of
choosing a variable rate that often features limited, or in some cases, no
early repayment charge, can be an attractive alternative.
Within mainstream BTL, where the price differential between fixed and variable
is currently negligible, this announcement is unlikely to turn the needle
either way. However, in the specialist BTL space, when an application doesn’t
fit the often rigid criteria, fixed rate options and prices can vary. Having
more certainty around the cost of a mortgage is likely to promote investors’
continued growth in both the wider market and within their specific portfolio.
It will be important for lenders to act responsibly when calculating the level
of rental income required to service the loan. This is vital when assessing the
success of property investment over a longer term. Lenders and property
investors alike need to ensure that they have applied a sense check for when
the economy turns itself round – to avoid a situation where the asset does not
provide the yield required to service the loan within ‘normal market
conditions’.
Whichever way you look at it, the news is positive for property investors.
With new lenders like Shawbrook entering the market and being open in their
desire to support property professionals, there is a real opportunity for
property investors to capitalise. This decision, along with the other
property-based government initiatives, confirms the commitment to getting the
economy back on track and will promote people to look more closely at property
as a stronger option for investment for the next 5 years.
We are certain this is going one of the hot topics discussed at the event so if you haven't already do register to get your tickets the next Property Investor Show - you can get your tickets from this link.
If you will be interested in exhibiting or advertising at the show feel free to contact us via enquiries@propertyinvestor.co.uk and quote the word Blog.
Karen
Bennett, Sales and Marketing Director, Commercial Mortgages at Shawbrook Bank
comments:
Mark
Carney’s decision will undoubtedly give a boost to the property investor
market.
The
certainty of fixed rates will be welcomed by those property investors looking
to guarantee their costs for a set period of time. That said, the option of
choosing a variable rate that often features limited, or in some cases, no
early repayment charge, can be an attractive alternative.
Within mainstream BTL, where the price differential between fixed and variable is currently negligible, this announcement is unlikely to turn the needle either way. However, in the specialist BTL space, when an application doesn’t fit the often rigid criteria, fixed rate options and prices can vary. Having more certainty around the cost of a mortgage is likely to promote investors’ continued growth in both the wider market and within their specific portfolio.
It will be important for lenders to act responsibly when calculating the level of rental income required to service the loan. This is vital when assessing the success of property investment over a longer term. Lenders and property investors alike need to ensure that they have applied a sense check for when the economy turns itself round – to avoid a situation where the asset does not provide the yield required to service the loan within ‘normal market conditions’.
Whichever way you look at it, the news is positive for property investors. With new lenders like Shawbrook entering the market and being open in their desire to support property professionals, there is a real opportunity for property investors to capitalise. This decision, along with the other property-based government initiatives, confirms the commitment to getting the economy back on track and will promote people to look more closely at property as a stronger option for investment for the next 5 years.
Within mainstream BTL, where the price differential between fixed and variable is currently negligible, this announcement is unlikely to turn the needle either way. However, in the specialist BTL space, when an application doesn’t fit the often rigid criteria, fixed rate options and prices can vary. Having more certainty around the cost of a mortgage is likely to promote investors’ continued growth in both the wider market and within their specific portfolio.
It will be important for lenders to act responsibly when calculating the level of rental income required to service the loan. This is vital when assessing the success of property investment over a longer term. Lenders and property investors alike need to ensure that they have applied a sense check for when the economy turns itself round – to avoid a situation where the asset does not provide the yield required to service the loan within ‘normal market conditions’.
Whichever way you look at it, the news is positive for property investors. With new lenders like Shawbrook entering the market and being open in their desire to support property professionals, there is a real opportunity for property investors to capitalise. This decision, along with the other property-based government initiatives, confirms the commitment to getting the economy back on track and will promote people to look more closely at property as a stronger option for investment for the next 5 years.
