Fundamentals of the UK property market remains strong

Buyers of property in the UK, including investors “Buy to let”, after news of the rate reduction by the Bank of England, anxious to reduce interest rates on mortgage loans.

The Bank of England took the unprecedented measure, lowering the rate to 0.25 percent after a very long period when the rate remained unchanged. The last time the Bank of England lowered the interest rate from 1% to 0.5% in March 2009 and before the referendum, all the talk was only about the rate increase. In the end, mortgage rates declined over the 7 years from 3.8% to 2.9%.

However, the cost of mortgage loans, of course, affects not only the rate of the Bank of England. Finance cost, competition level, target level of profitability, as well as assessment of current and future market conditions, the price of risk are also important criteria.

This means that after the rate cut by the Bank of England would not necessarily followed by a decline in mortgage rates. The appetites of banks depends not only on the above factors, but also by the financial condition of the borrower.

About 50% of borrowers took out a loan at a fixed rate and they did not affect the reduction. The remaining 50% and that 4.9 million people , of which 1.5 million are floating rate under the agreement is unable to see the lower rates on the loan, but only if she is not below the allowed minimum.

For a new borrower the lending is extremely competitive and will remain so for a long time. But since rates are very attractive, 90% of the lending market is also carried out at a fixed rate.

In terms of political uncertainty understand the hesitancy some buyers relative purchase the property. However, it is clear that low interest rates on loans reflect the confidence of financial markets and the stability of the financial sector in the UK as a whole.

For investors “Buy to let” time is also favorable. On the background of an imbalance of supply and demand, increasing demand for the rental market and if investors will be able to get a loan at a reduced rate or to refinance, he can extract even more income from investments.

Thus, the fundamental indicators of the market the UK real estate remains strong and, given that in conditions of financial instability the yield of stocks and bonds will decline, the housing market is quite good prospects.

® Alice Morgan. 08.08.2016 G.

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