Cost of living is going up...Is there money in my house?
Posted on 23rd March 2022 at 15:14
March 2022 Market Update
As I’m sure many of you will have seen the bank of England increased the base rate from 0.5% to 0.75%
on Thursday 17th February. This is a result of rising inflation and America increasing their interest rates a week earlier.
But why does the Bank of England increase interest rates?
One of the tools the Bank of England uses to keep control on the prices of all of the things we buy, is to
make them more expensive to buy to slow the demand for these items as they become more expensive
to buy. So today with the number of home buyers far outweighing the number of properties for sale, this
has driven house prices up. So, an attempt to slow down house prices the Bank of England increase the
cost of lending which will in turn force some buyers out of the market as it is no longer affordable for
them to buy at this stage. Without this the price of houses and other commodities would continue to grow
to unsustainable levels.
What does this mean to us?
As the money that all lenders receive from the Bank of England to lend to its customers has now become
more expensive, lenders will now look to increase their rates also to maintain their profit margins.
Anybody who is on a variable or tracker rate, your rate and monthly payments are going to increase. If
you are on a fixed rate mortgage, you will not see any difference. Your fixed rate mortgage provides
protection against this happening.
What’s going to happen later in the year?
As the cost of most things, we are using is also rising – gas and electric, fuel, council tax and fuel. I don’t
believe the Bank of England have much more opportunity to increase interest rates much further than
this in the short term. If people don’t have enough disposable income to pay increased mortgage or utility
bills, they run the risk of missing payments leading to financial difficulties. When people begin to fall
behind on their mortgage payments, lenders begin to repossess properties and mass repossessions
causes the market to collapse. So, unless the costs in other areas such as energy, fuel or food begin to
stabilise or incomes rise to balance out the cost of living, the Bank of England cannot increase rates too
much. Small increases can stabilise costs and demand, but bigger increases make life unaffordable for
people and this can lead to major economic problems.
Is now still a good time to buy property?
If the property is for you to live and call home, you shouldn’t see a property as an asset or commodity for
you to cash in because you always need somewhere to live. So, when you sell, the money you have
from the sale is short lived as you will then use this as a deposit on your next purchase or spend it on
renting. Also ‘a rising tide raises all boats’, although your home goes up in value, so do all of the other
properties you would like to purchase so you never outgrow or beat the market.
If the property you are looking to buy is going to be an asset, this should be done so with a long-term
view. Markets go up and down in cycles, but year on year the trend is always upwards. This is due to
supply and demand; we live on a small island with a growing population that is living longer and longer
and a finite amount of room to build more homes. So, by holding a property for the long term you can
afford to ride out many upturns and downturns in the market, emjoying cashflow in the form of rent
If you are on a fixed rate mortgage that is coming to an end or are on a variable or tracker mortgage,
now is the perfect time to review your mortgage to see if you can find a more competitive interest rate or
alter your mortgage terms to make your mortgage more comfortable.
At Green & Green we are happy to review your mortgage for free whether you are a client of ours or not.
Call us on 01482 205084 or email Admin@greenandgreen.net.
Tagged as: bank, bank rate, bank statement, best rate, bills, costofliving, deposit, electric, gas, highbills, inflation, money, mortgage, mortgage advice, mortgage adviser, remortgage, review, tax
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