David Whittaker (pictured) is managing director of Mortgages for Business
A lower base rate – and even more QE – doesn’t necessarily mean mortgage rates will be reduced. Mortgage pricing is largely dictated by the cost of borrowing on the inter-bank swap markets, while the current uncertainty around liquidity will mean that some lenders will not want to reduce their rates. Those on tracker mortgages will see a fall in their monthly payments – though many borrowers, particularly buy to let landlords, have already opted for the reliability of similarly-priced fixed rate deals.
The big unknown is the new Term Funding Scheme, and the more significant question of how this might reform the financial plumbing of the UK in a more radical or unexpected way.
Aside from the changes announced today, the reasons for such a bazooka approach by the Bank are important too.
It seems clear that the general economic outlook has worsened considerably in the wake of the EU referendum. And this raises questions for investors. Returns on savings will weaken, as will bonds and equities – and lower yields will only be exacerbated by new monetary stimulus. Meanwhile, the property market’s fundamentals remain strong – given the imbalance between supply and demand for homes in the UK and accelerating demand for rental accommodation.
This will continue to make buy-to-let a solid investment for those property investors with the right finance and a carefully thought-through business plan.