The Bank of England announced the day before Brexit that it would keep the base interest rate at its current level of 0.75 pe cent, quashing the rumours of yet another interest rate cut. If you are about to take out a mortgage, what does the decision mean for you?
First of all, it's important to assuage any fears of a sharp interest rate rise any time in the future: although there is some optimism surrounding the UK's economic growth prospects, we will not see an economic boom any time soon. The economic growth forecast for the first quarter of 2020 stands at a very modest 0.2 per cent, and the projection for the entire year ahead is just 0.75 per cent.
This means that prospective buyers needn't worry about any sharp mortgage rate increases, or a sudden and unexpected surge in house prices beyond a temporary spike of activity immediately following Brexit. Even if you are on a standard variable rate, it's unlikely that there will be any drastic changes to mortgage rates this year or next.
If anything, mortgage applicants should be aware of the potential knock-on effect of an economic downturn. The Bank of England voiced a degree of anxiety over the economic effects of Brexit still to be seen and reserved the right to slash interest rates further a few months down the line if the UK economy takes on a downward trajectory. It's still unclear what trade deals will emerge from this year's ongoing negotiations, or how world economic events outside the EU, including any potential effects of the Coronavirus on the Chinese economy, may impact the pound.
Our advice is: by all means go for the mortgage if you can afford it, given how good the mortgage rates currently are, but also make 2020 the year you develop a robust savings strategy to cushion yourself from the impact of a possible weakening of the economy.
Find out how much you could borrow for a mortgage with the help of online mortgage expert Habito's comparison tool below.