The Bank of England meets tomorrow (Thursday 7 November) to set the official Bank Rate or base rate as it is also known.
This is the rate that banks and building societies use to set the interest rates they charge borrowers.
The last interest rate reduction was in August, from 5.25% to 5%.
At the end of this summer, some experts were predicting there could be two more rate cuts this year.
So, it was something of a surprise when, at the Bank’s last meeting in September, the decision was to hold the interest rate at 5%.
There has been a significant development since then, though. Inflation has fallen to 1.7% – below the Bank’s 2% target – meaning a rate cut looks more likely.
A few weeks ago, the Governor of the Bank of England, Andrew Bailey, said the Monetary Policy Committee could be ‘a bit more aggressive’ in reducing the interest rate if inflation stays under control.
But Chief Economist Huw Pill later said, “It will be important to guard against the risk of cutting rates either too far or too fast.”
On balance, an interest rate cut could be on the cards for tomorrow. But the situation is far from certain.
What might happen in the property market if the rate is cut?
If the interest rate is cut, it will most likely be by 0.25%, down to 4.75%. A small cut, maybe, but it will signal that rates are on a downswing. If there was a slight reduction in mortgage rates, this could tempt more buyers into the market.
What might happen in the property market if the rate is held?
It could make buyers take a more cautious view for the time being.
But maybe not for long – because it will probably make it much more likely that the interest rate will be cut at the Bank’s next meeting in December.
But this is important, too. Christmas is just around the corner, and many people have other things to do. The real test will be in January, which is always a good time for house hunting.
If the interest rate is firmly trending down, it could bring buyers out in numbers.
However…
The above being said, things are never quite that simple. Our contacts are indicating that within the last 48 hours a number of lenders have been increasing their rates. A reduction in the Bank of England base rate does not necessarily equal a reduction in mortgage rates for buyers, as mortgage rates are influenced by other factors, in particular SWAP rates on the money markets. Unless of course you are looking at, or are already on, a tracker mortgage, which tracks the Bank of England base rate.
But remember, regardless of the interest rate, well-priced properties should always attract buyer interest. If you’re considering selling, a good, experienced estate agent can advise you.
We can help.
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This content is for your information only and is not attended to address your particular personal requirements. It does not constitute financial advice or recommendation and should not be considered as such. R Whitley & Co are not regulated by the Financial Conduct Authority (FCA), are not financial advisors and are not authorised to offer financial advice. Please seek your own independent financial advice.
