Newington Green mortgage costs set to fall
Britain’s decision to quit the European Union could give property buyers and homeowners in Newington Green a bigger budget – if the Bank of England cuts its base rate.
In a speech at the Bank of England’s Threadneedle Street headquarters, Governor Mark Carney explained that its Monetary Policy Committee, which sets interest rates, faces a trade-off between stabilising inflation, which could be stoked by a weaker pound, and shoring up growth and jobs. But he erred on the side of supporting growth with lower borrowing costs.
His announcement last week sent the value of the pound down against the dollar as financial market traders responded to news of the stimulus.
One commentator noted: ““Currency movements as a result of Brexit could see a unique buying opportunity emerge. The uncertainty created could keep interest rates lower for longer which bodes well for investment in real estate.”
This makes property in London cheaper for overseas investors who use currencies with values based on the US dollar to fund their investments.
Mr Carney also suggested that a move to lower the cost of borrowing could come as early as July. The Bank of England’s base rate has stood at a record low of 0.5% since 2009.
“The MPC will make an initial assessment on 14 July, and a full assessment complete with a new forecast will follow in the August Inflation Report,” the Governor revealed. “In August, we will also discuss further the range of instruments at our disposal.”
If the bank’s base rate does fall, UK-based investors using a mortgage to fund their central London property purchase will be able to access cheaper home loans.
Not only that, a homeowner in Newington Green with a 25-year £3000,000 mortgage paying 2% above the base rate would see their repayments cut from £1346 a month to £1308 if Mr Carney cuts interest rates to 0.25%. And if he slashes them to zero, the mortgage cost drops to £1272.
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