The first UK interest rate increase in over a decade has variable-rate mortgages climbing while buyers into Britain’s prime housing market will feel no pain.
The rate increase, from 0.25 percent to 0.5 percent was announced Thursday, which Knight Frank Finance’s managing partner Simon Gammon told Mansion Global would “immediately” effect variable-rate mortgage borrowers’ wallets.
“This quarter point increase translates into an extra £250 [$327] a year in interest for every £100,000 [$131,000] of borrowing,” he said.
Most buyers in the prime housing market, however, don’t take out mortgages according to a 2015 Savills study; one in three home buyers purchasing a house at about $2.6 million or more took out a mortgage for, at the most, 50 percent of the cost.
In fact, Savills predicted an interest rate hike would spur new deals for prime market buyers: “It is likely to be a catalyst for buyers who might previously have bought in the well-established parts of London either to look to emerging prime markets or to those in commuter towns, as they seek to make the debt they are able to secure stretch further.”
The “real problems” in the UK property market “remain stamp duty and Brexit,” as Becky Fatemi, a London brokerage director, told Mansion Global.
[Mansion Global] — E.K. Hudson