Burgess
Hill homeowners will be among those affected by the latest rise in the Bank of
England interest rates. The first increase in 10 years; they have just been
raised from 0.25 percent to 0.5 per cent. This uplift comes as inflation hits a
51-month high of 2.9 per cent whilst the national unemployment rate is at an
all-time low of 4.3 per cent.
Interestingly,
the Governor of the Bank of England has indicated that the interest rate is
likely to increase again over the next couple of years, but Mr Carney said
mortgages and savings would not be affected in the short term. However, look at
all the big banks and just about all of them have increased their standard
variable mortgage rate.
The average Burgess Hill
mortgage is £115,397.
I have
to ask by how much Burgess Hill homeowners (on variable rate or tracker
mortgages) will see their repayments increase?
In the
RH15 postcode there are 5,495 homeowners with a mortgage, of which 2,361 have a
variable rate mortgage (the remaining have fixed rate mortgages). The total
amount owed by those RH15 homeowners with those variable rate mortgages is
£272,411,907, meaning the average monthly mortgage payment for those home
owners on variable rate mortgages before the interest rate rise was £899.78 per
month and now its £923.82 per month, meaning the
interest rate rise will cost Burgess Hill homeowners on average an extra
£288.49 per year.
Whilst
this is the first raise in interest rates in over 10 years, it must be noted it
is at a significantly low level compared to figures in the 1970s and early
1990s. Many of my readers talk of interest rates at 17 per cent when Sir
Geoffrey Howe increased them to try and combat the hyperinflation (from the
fallout of the financial crisis that hit Britain in the 1970’s) and Norman
Lamont in September 1992 with the infamous Black Wednesday crisis, when
interest rates were raised from 10% to 15% in just one day.
So,
what will this interest rate actually do to the Burgess Hill housing market?
Well,
if I’m being frank – not a great deal. The proportion of Burgess Hill
homeowners with variable rate mortgages (and thus directly affected by a Bank
of England rate rise) will be smaller than in the past, in part because the
vast majority of new mortgages in recent years were taken on fixed interest
rates. The proportion of outstanding mortgages on variable rates has fallen to
a record low of 42.3 per cent, down from a peak of 72.9 per cent in the autumn
of 2011.
If
more Burgess Hill people are protected from interest rate rises, because they
are on a fixed rate mortgage, then there is less chance of those Burgess Hill
people having to sell their Burgess Hill properties because they can’t afford
the monthly repayments or even worse case scenario, have them repossessed.
However,
and this will be of interest to both Burgess Hill homeowners and Burgess Hill
buy to let landlords; for every 1% increase in the Bank of England interest
rate, it will cost the average Burgess Hill homeowner on a variable rate
mortgage £96.16 per month.
So,
what next? Because UK inflation levels are at 2.9 per cent (the country’s
highest rate since April 2012) and the Bank of England is tasked by HM
Government to keep inflation at 2 per cent using various monetary tools (one of
which is interest rates) – you can see why interest rate rises might be on the
cards in the future as increasing interest rates tends to dampen inflation.
No comments:
Post a Comment