Interest Rates Held at 3.75% – What Does It Mean for the Local Property Market?

The Bank of England has once again decided to hold the base interest rate at 3.75%, providing some stability for borrowers – but there are clear signs that the outlook for mortgage rates remains uncertain.

At its latest meeting, the Bank of England’s Monetary Policy Committee voted by six votes to three to keep rates unchanged. Interestingly, the remaining three members voted to increase the base rate to 4%, highlighting the continued concern around inflation.

For homeowners, buyers, sellers and landlords across Keighley, Haworth, Oakworth and the wider Aire and Worth Valleys, what does all this actually mean?

Why have interest rates been held?

Inflation has risen to 3.1%, above the Bank of England’s 2% target.

One of the major concerns at present is the effect of higher and more volatile global energy prices. Rising energy costs can eventually feed through into household bills, transport costs and the price businesses charge for goods and services.

For the time being, the Bank has chosen not to increase interest rates, but it has made clear that it is continuing to watch inflation closely.

This means we are currently in something of a “wait and see” period.

What does this mean for mortgage rates?

It is important to remember that mortgage rates do not move directly in line with the Bank of England base rate.

Fixed mortgage rates are heavily influenced by financial market expectations and swap rates – and lenders can therefore increase or decrease their mortgage pricing even when the base rate itself remains unchanged.

That is particularly relevant at the moment, as mortgage pricing has already started to move upwards with increased uncertainty around inflation and the future direction of interest rates.

For anybody buying a property, therefore, it is worth speaking to a mortgage adviser and looking at the actual products available rather than assuming that a base-rate hold automatically means mortgage rates will remain unchanged.

Should buyers wait for interest rates to fall?

This is probably one of the most common questions in the property market.

There will always be buyers who decide to wait in the hope that mortgage rates improve. However, trying to perfectly time both the mortgage market and the housing market can be extremely difficult.

Interest rates may change, mortgage products may change and property prices may change too.

For buyers who need or genuinely want to move, the important questions are whether the property is right for them, whether the purchase price is sensible and whether the mortgage repayments are comfortably affordable.

A mortgage rate can potentially be changed when a fixed deal comes to an end. The price paid for the property cannot.

What does it mean if you're selling?

The current market makes realistic pricing more important than ever.

Buyers are still out there, but affordability is a much bigger consideration than it was during the ultra-low interest rate years.

A buyer borrowing a substantial proportion of the purchase price will naturally be sensitive to changes in their monthly mortgage repayments. This means sellers need to recognise that buyers are increasingly looking carefully at value for money.

Launching significantly above a property's realistic market value in the hope of "testing the market" can therefore be counterproductive.

Properties that are well presented, properly marketed and sensibly priced can still attract serious buyers. Those that are overpriced risk sitting on the market and becoming stale.

People are still moving

It is also important not to confuse a more cautious property market with a property market where nobody is moving.

People do not buy and sell houses simply because interest rates have moved.

Families still need more space. Couples separate. People relocate for work. First-time buyers want to get onto the property ladder. Older homeowners downsize. Executors sell inherited properties. Landlords buy and sell investments.

Life continues – and so does the housing market.

What changes during periods of economic uncertainty is that buyers tend to become more selective and more price-conscious.

What about landlords?

Interest rates remain particularly relevant for landlords with borrowing.

Higher mortgage costs can have a significant effect on the profitability of a buy-to-let property, particularly when an existing lower fixed-rate mortgage comes to an end.

However, property investment needs to be looked at on an individual basis. Purchase price, achievable rent, mortgage borrowing, maintenance costs, taxation and long-term capital growth all form part of the calculation.

Locally, there continues to be demand for good-quality rental properties, although landlords should always assess the figures carefully before purchasing.

Our view of the local market

At Davies Properties, we believe the current market is one where good advice, sensible pricing and strong marketing matter enormously.

We are operating in a very different environment from the exceptionally low interest rate years, and buyers understandably have to pay closer attention to affordability.

That doesn't mean properties won't sell.

It means sellers need to be realistic about their asking price and ensure their property is marketed properly from the outset.

If you're thinking about selling, it is also worth remembering that national headlines don't always tell you what is happening in your street, your village or your particular price bracket.

Property markets can vary considerably even across relatively small geographical areas.

Thinking of moving?

If you're considering selling a property in Keighley, Haworth, Oakworth, Oxenhope, Riddlesden, Cross Roads, Cullingworth, Silsden or the surrounding area, we're happy to give you an honest assessment of its current market value.

At Davies Properties, we're an independent, family-run local estate agency and we pride ourselves on straightforward advice – whether you're ready to move immediately or simply want to understand your options.

For a free, no-obligation market appraisal, contact Davies Properties on:

01535 872 018

Or get in touch through our website.

Davies Properties – local property people who know the local market.