What's Happening With Mortgage Interest Rates?
Mortgage interest rates have been historically low for the last decade. But now, many analysts are suggesting that the penny may have finally dropped, and we’re about to enter a period of higher rates. They could be right if December’s small hike is anything to go by. However, it’s hard to predict what happens next. But what we can do is look at the current state of play with mortgage interest rates, how they affect buy-to-let lending and the role Molo has to play. So read on to find out what’s happening with buy-to-let interest rates.
The recent history of interest rates
In March 2020, shortly after the pandemic took hold, the Bank of England (BOE) lowered rates to an all-time low of just 0.1%. Even before that, rates remained competitive since the housing crash in 2008
In August 2016, they fell further to 0.25% before going back up to 0.5% in 2017 and then 0.75% in 2018. Even these rate rises were marginal compared to what came before. The rate of 0.75% was then lowered to 0.1% after the outbreak of Covid and, to some extent, the uncertainty at the time over Brexit.
You need to go back further than five years to understand interest rates in the UK. Pre-crash, in July 2007, interest rates were 5.7%. Fast-forward two years – and one housing crash – and rates fell to 0.5% in March 2009. This was the lowest they had been in 300 years, which gives you some idea about the gravity of the housing market crash and the global credit crunch it caused.
Why have interest rates increased?
With rates at a historically low level of 0.1%, there was only really one they could go: up. Other factors have also contributed to the recent increase, such as surging inflation. Figures show the Consumer Price Index (CPI) surged by 5.1% in the 12 months to November 2021 – the highest increase in a decade.
The BOE sets the inflation rates to control the economy. When inflation starts to rise, interest rates are usually one of the first things to increase. And while 0.25% is a minor increase, analysts predict further rises are in store.
What happens next?
No one can tell for sure what the BOE will do next in terms of raising the interest rates. But with rates so low, it was only a matter of time before they began to rise. Many have predicted several increases throughout 2022, as the UK economy aims to recover from the pandemic.
This is likely to affect landlords buying a new property or remortgaging than it is borrowers locked into their fixed-term rate. The Office of Budget Responsibility has also predicted that mortgage rates, in general, will increase by 13.1% in 2023.
Any rise will be dictated by the base rate, however. Still, it’s not stopped investors thinking about their next move in the property market, whether that’s taking advantage of current rates for a new buy-to-let purchase or remortgaging to lock in low rates.
Final words
Interest rates in today’s buy-to-let market
Investors have enjoyed historically low rates for more than a decade now. And while that doesn’t look like it will change dramatically within the next 12 months, interest rates are predicted to go up in 2022. That’s why there’s no better time than the present for investors to start thinking about their next move in the market.
