“You maniacs. You blew it up” Rates back to 0.5%

Charlton Heston may have been mid-realisation that he was back home on Earth all along, and the ape dominated world he was trying to escape was really the ruins of post-apocalypse USA – but i’m sure he was none to fond of uncertain monetary policy announcements either. 

So it is perfectly reasonable that he would have reacted just as strongly to Mark Carney et al.’s recent announcement of the first Bank of England interest rate hike in more than ten years (that’s my opinion and i’m sticking to it).

Of course in reality rates remain historically low, only returning to half of one per cent – the rate at which they stood until post-referendum fever saw the MPC introduce a 0.25 per cent cut last year.

What does this mean?

It means that rates remain very low, and therefore borrowing is likely to remain relatively cheap.

At the same time some savers may benefit from a heady rise of one quarter of one per cent interest against their savings – if banks choose to pass on the hike.

More importantly for the private rented sector mortgages, those which track the Bank of England base rate, will see their rates increase by that same amount. As illustrated below:

  Monthly Interest Payment Increase
Loan Outstanding (£) 0.25% 0.50% 0.75% 1%
         
£50,000 £10.42 £20.83 £31.25 £41.67
£75,000 £15.63 £31.25 £46.88 £62.50
£100,000 £20.83 £41.67 £62.50 £83.33
£125,000 £26.04 £52.08 £78.13 £104.17
£150,000 £31.25 £62.50 £93.75 £125.00
£175,000 £36.46 £72.92 £109.38 £145.83
£200,000 £41.67 £83.33 £125.00 £166.67
£225,000 £46.88 £93.75 £140.63 £187.50
£250,000 £52.08 £104.17 £156.25 £208.33
£275,000 £57.29 £114.58 £171.88 £229.17
£300,000 £62.50 £125.00 £187.50 £250.00
£350,000 £72.92 £145.83 £218.75 £291.67
£400,000 £83.33 £166.67 £250.00 £333.33
£450,000 £93.75 £187.50 £281.25 £375.00
£500,000 £104.17 £208.33 £312.50 £416.67

In real terms this will equate to just under £21 per month for every £100,000 borrowed.

Or for the average private landlord around £1,160 per year (the ‘average’ landlord has around £465,000 in mortgage debts according to the NLA).

All in all this is likely to equate to another squeeze on rental margins, exacerbating the impact of incipient changes to the destructibility of finance costs – including BTL mortgage interest.

Hands up who’s looking forward to the Budget on 22 November?

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