Despite expectations that interest rates would be on an upward trend, the Bank of England has managed to keep them at a record low of 0.5% – the eighth consecutive year for profoundly low rates. This is in spite of the current direction of the Sterling, sent downwards in anticipation of the looming EU referendum.
Encourage Investment
This move is necessary according to the Bank, who insist that low interest rates are needed to keep inflation stable in the short term until growth starts picking up. The anticipation of Brexit is having an impact in the short term but is not expected to be a long term problem. The Bank sees rates increasing toward the 2% target within the next two years and wages will start increasing in line with this, seeing Britain return to a pre-2008 economy.
For now, the 0.5% rate was necessary to offset the weak investment levels and discourage spending.
However, the Bank denied that they needed to get into negative interest rates or prematurely release quantitative easing packages. Rather than aggressive monetary policy, they said the government should create initiatives to expand growth beyond its current 0.5% expectation.
Britain’s Housing Market Post-Brexit
However, if we actually leave the European Union things could be very different. The uncertainty associated with Brexit will only be extended – interest rates will go up and ultimately make Sterling even weaker.
This could affect the housing market as mortgages would become more expensive and people will stop buying. There are other markets which are worth looking at, as close by as France, or Spain.
Robert Stones Target Markets believes that the higher cost of mortgages in the UK would encourage a more global outlook, making it more important to understand the property market overseas. The current uncertainty provides the opportunity to take advantage of more potentially rewarding investments, particularly as we wait for the dust to settle in the UK. See Robert Stones Target Markets for further advice on where to invest.
While the UK property market has leapt back to life in the last few years, it risks sinking back now. Lenders will ultimately need to start taking measures to favour potential buyers and buyers need to seriously consider where they invest.