The announcement by the Bank Of England that interest rates will remain fixed at 5.25% for the seventh month in a row will not have surprised anyone working in the property sector.
OK, many of us may have been quietly hoping the BOE might pull a rabbit out of the hat but it was always highly unlikely in the middle of a General Election.
With no meeting in July eyes are now firmly fixed on the August meeting for the first potential cut to rates in more than four years.
I suspect the BOE will cut rates, and it will be much needed.
But I do need to insert a rather large dose of reality. Typically, lower interest rates see the market open up as mortgage costs become more affordable. As a result, more buyers enter the market and the demand for houses increases. The problem right now is that the supply of housing remains so acutely bad that any cut by the BOE will probably have a very minimal impact on the market.
The market has become used to high rates. Estate agents, buyers and sellers have had little choice but to cut their cloth accordingly.
Just as fixed mortgage rates have shielded homeowners from rising interest rates, they will prevent households’ interest costs from falling rapidly when interest rates are cut.
While borrowers on tracker and two-year fixed rate deals will soon see their mortgage payments drop, those on five-year fixes will still face higher repayments when they refinance.
That said, I'm still hoping that August will deliver a rate cut. Activity has been steadily improving since the Spring but there is still a little sense of hesitancy among some. Announcing the first rate cut in four years could help to smash through that. And, coupled with steadying inflation, it will help to provide stability in the market. But that stability will count for nothing if it isn't matched by supply-side policies.
If the polls are to be believed, Keir Starmer will soon be moving into Number 10. Like any new Prime Minister he’ll enjoy a short honeymoon period. But by September it’s vital we in the industry can see a vision as to how those in power will address the housing crisis.
The Bank of England can't and won't provide the solution to Britain’s housing crisis.
The chronic shortage in the supply of new homes is denying an entire generation the right to own their own property.
This, in turn, is leading to rental prices in some areas soaring to new highs. I am now seeing situations, regularly, where dozens of people are fighting to let a very average property for a staggering sum, just so they can get a roof over their head.
It isn’t sustainable. It’s not acceptable. And it's why the very first priority from day one, for whoever wins the Election, must be to start building new homes.
And quickly.
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