Bank of England base rate increase-the facts

The Bank of England base rate has recently hit 5% for the first time since April 2008.

The media will report this as the highest it has been for 15 years and that it has risen 13 times in a row since December 2021. 

However, this is only one side of the story and a balanced view could help make a more informed decision when moving home.

 Over the past 50 years, the average base rate has been 9.13% and it has been   5.91% since 1694. Therefore, borrowing money is actually still cheap in   comparison to historic prices it is just not almost interest free such as what we   have seen in recent years. 

 In fact, the base rate only dropped below 2% for the first time in history in   January 2009 and the 13 years of a sub 2% base rate actually equates to only   3.95% of the last 329 years. 96.05% of the time the base rate has been in excess   of 2%.

 Unlike the market of the early 90’s and 2008/2009, there are several factors that   have stopped prices from crashing since the mini-budget in September.

Affordability on mortgages have been stress-tested for higher rates, and 81% of the total UK housing market is now equity!  

There are several other factors that could be mentioned to support the theory that the market is not due to crash, such as unemployment is at a 40-year record low and half of what it was compared to the above periods. and the media are creating sensationalised headlines to make revenue. 

In conclusion, the booming market of 2020/2021/2022 is indeed behind us but supply levels remain very low and demand is still slightly up on 2019, thus meaning prices have not crashed like many had predicted.  

If you would like to discuss this in more detail and what it means to your future plans, you can reach Andy McHugo on 07751 675267.