As investors and landlords, we have got used to low bank of England lending rates, but rates are now on the rise for the first time in three years, so should we be concerned about this?
Interest rates have been at historic lows – at or around 0.5% – for over a decade. Following the last major economic crisis of 2008/9, the government at the time and the Bank of England were keen to avoid the economy fully collapsing and so lowered interest rates quickly to protect the economy. Subsequently, these new historic lows have remained (apart from 2016/17 when a new even lower benchmark of 0.25% was reached for a time). Prior to the recent pandemic, The Bank of England had started to raise interest rates slightly (to 0.75%) before lowering them again to protect the economy.
With inflation on the increase again, (projected to reach 6% for a time this Spring) we are again in an environment where we can expect rising interest rates. However, whilst it is a shock to see interest rates more than double overnight – going from 0.1% to 0.25% – we are in a very different position to previous decades and should not expect to go back to long periods of very high base rates. The factors causing the current increase in the inflation rate are virtually all temporary and linked to the effects of the pandemic. The Bank of England is expected to raise interest rates again during the year and is forecasting that inflation should fall back to pre-pandemic levels by the end of 2023. Any interest rate rises are expected to be small. So, no need to panic!
If you have any questions about the subject above or any other property related topic, you can get in touch by email to contact@lifeboatlettings.com or by phone 01233 802803
