New £1 billion fund announced for building new homes in England

The Government and Barclays have announced a £1 billion housing development fund to help deliver thousands of new homes across England.

Under the agreement loans ranging from £5 million to £100 million, which will be competitively priced, will be available for developers and house builders who are able to demonstrate the necessary experience and track record to undertake and complete their proposed project.

Funding is open to new clients as well as existing Barclays clients, and will put greater emphasis on diversifying the housing market, as at present almost two thirds of homes are built by just 10 companies.

A key priority of The Housing Delivery Fund is to support small and medium sized businesses to develop homes for rent or sale including social housing, retirement living and the private rented sector, whilst also supporting innovation in the model of delivery such as brownfield land and urban regeneration projects.

‘There is a vital need to build more good quality homes across the country. This £1 billion fund is about helping to do exactly that by showing firms in the business of house building that the right finance is available for projects that help meet this urgent need,’ said John McFarlane, Barclays’ chairman.

Housing Secretary James Brokenshire said that it will see Barclays in partnership with Homes England also help to see more design and innovation introduced to new home building.

‘It is a further important step by giving smaller builders access to the finance they need to get housing developments off the ground. This is a fantastic opportunity to not only get more homes built but also promote new and innovative approaches to construction and design that exist across the housing market,’ he added.

According to Sir E Lister, chairman of Homes England, the organisation will play a more active role in the housing market and do things differently to increase the pace, scale and quality of delivering new homes.

‘The Housing Delivery Fund demonstrates Barclays’ commitment to the residential sector and will provide a new funding stream for SME developers to help progress sites and deliver more affordable homes across England,’ he said.

Brokenshire added that it will move towards the target of 300,000 new homes being built a year by the mid-2020s and that with 217,000 homes built last year, England has seen the biggest increase in housing supply for almost a decade.

UK Land Values Increased by £400 Billion in 2017

Official figures from the Office for National Statistics (ONS) have revealed that rising land values contributed significantly to the overall net worth of the UK in 2017.

Last year, the UK’s net worth was estimated at

trillion, rising by billion between 2016 and 2017, which calculates at an average of per person.

This represents a growth of 5.1%, and whilst well below the 9.2% recorded between 2015 and 2016 it remains in line with the long-term average of 5.2% growth between 2009 and 2017.

Non-financial assets were the key driving force behind the rise in the UK’s net worth, with the largest contribution coming from a bn increase in land values since 2016.

Land in the household sector rose in value by bn since 2016 to tn in 2017, representing 76% of the total value of UK land compared with 61% in 1995.

The ONS notes that the value of land in the UK accounted for a higher proportion (51%) of its net worth in 2016 than any other G7 country; more than France’s (41%) and almost double Germany’s (26%).

Rising demand from housebuilders has led to strong annual growth in greenfield land values in the Midlands, as values across the UK increased by 0.8% in Q2 2018 according to Savills.

More Londoners Buying Property in the North and Midlands

The number of homeowners from London buying properties outside the capital has increased, according to new research from Hamptons International.

Just over 30,000 of Londoners looking to buy a new property left the capital in the first half of 2018, some 16% more than H1 2017 and an increase of 61% over the last decade.

The majority of homeowners moving, around 38%, moved to the South East, a modest 3% fewer than the first half of 2017, followed by 30% moving to the East of England.

However, the number of movers leaving London and buying property in the North and Midlands has more than tripled in the last decade, with over a fifth (21%) moving to these regions compared to just 6% ten years earlier.

First-time buyers are also buying outside of London, with around 31% buying their first home beyond the capital. Whilst this is nearly double the number recorded five years ago, it is a 2% decline on last year’s figures, due to savings from stamp duty relief and the Help-to-Buy scheme.

Although the vast majority of first-time buyers, some 85%, moved to East of England or South East, Hamptons notes this is 10% fewer than four years ago. On the other hand, more than one in ten (12%) buying their first property in the North or Midlands, four times the number recorded in 2010.

“With affordability stretched, more Londoners are moving out of the capital to find their new home,” said Aneisha Beveridge, research analyst at Hamptons International.

“More people are making a bigger move and buying a larger home sooner to avoid having to pay stamp duty on additional moves as they trade up. But for many, this means heading further North.”

Beveridge goes on to note that despite more first-time buyers staying in the capital, “raising a deposit remains a hurdle for many, which helps explain why increasing numbers of first time buyers who leave London are heading North.”

Empire Property Concepts Nominated For Building Awards

Great News for Empire Property Concepts

As you know, we work very closely with Empire Property Concepts by bringing their offers to you.

So we are very pleased to announce that they have been nominated for ‘Refit and Refurbishment Company of the Year’ at the Yorkshire Property Investor Awards this year!

Set up by Director, Paul Rothwell, in September 2009 Empire has progressed impressively well. Especially with the difficult economic and property market conditions, the company has always attracted investors to aid its growth.

Currently with 1200 units under management to include the various aforementioned portfolios and consultancy clients. Empire seeks to market to new investors, and deal with the administration & development cost collection only. Empire has also expanded its team in terms of management, build management, accounts & administration.

To see the full list of nominations, please click here.

What’s the deal for your personal finances if there’s a no-deal Brexit?

Amid warnings of dire consequences, here’s how to cope if it does become a reality
The pound’s fall since the EU vote has benefited tourists coming to the UK, but not Brits going abroad.
The pound’s fall since the EU vote has benefited tourists coming to the UK, but not Brits going abroad. Photograph: Dan Kitwood/Getty Images

The currency markets have been doing little to allow British holidaymakers to enjoy a relaxing summer. The pound recently slumped to its lowest level against the dollar and the euro so far this year, meaning a break away just got more expensive.

Behind that slump was the growing possibility that talks between London and Brussels will break down over the coming months and the UK risks leaving the EU with no deal in place. Bank of England governor Mark Carney has warned that the prospects of this happening are “uncomfortably high” and should be avoided at all costs. But if that no-deal does, indeed, become a reality, what will be the impact on the rest of our personal finances?

Pensions

An economic upheaval would affect pensions in some ways. Workers could be less able to invest in long-term savings, and there is the possibility that a squeeze on taxes would affect the ability of the government to pay for the pensions “triple lock”, which guarantees a minimum increase in the state pension each year, according to Steve Webb, director of policy at pensions investment company Royal London.

At present, hundreds of thousands of British expat pensioners live in EU countries and get their UK pensions paid and annually uprated as the UK has a reciprocal social security agreement.

“There is a risk that if there was a hostile ending of relationships between the UK and the EU, these reciprocal uprating arrangements could break down, and expat pensioners might miss out on annual upratings. Ministers assure us that a deal will be done. But it’s hard to know what a world of poor inter-governmental relationships would look like post-Brexit,” says Webb.

Rates on annuities – which guarantee an income for life – dropped to record lows when the referendum results came through, and some providers pulled out of the market, although rates are now rising slowly, says Rachel Springall of financial data provider Moneyfacts.

With the prospect of no deal, risk-averse retirees could be wise to invest sooner rather than later, says Moira O’Neill of Interactive Investor, an online trading and investment platform. “If you need income, but can delay buying an annuity for a few years – which might be a good idea, as the rates improve as you get older – look at a drawdown arrangement,” she says.

“Since the pension freedoms were introduced in April 2015, growing numbers of people have opted for drawdown schemes, whereby they can take sums directly out of their pension pot as income, while leaving the rest invested. A no-deal Brexit could give investors a bumpy ride, so those in drawdown should consider not eating into their capital, to allow it to recover.

“It’s best, if you can, to only take the ‘natural yield’ – that’s the actual income earned by the investments. For example, dividends on shares or interest or ‘coupon’ paid by bonds.”

Currency

The slump in the value of sterling earlier this month came as investors looked to protect themselves against the possibility of a collapse in talks, and there have been predictions that the pound will continue to fall in the coming months. Last week, foreign secretary Jeremy Hunt said that a no-deal Brexit could result in a sharp fall in the value of sterling.

“If a no-deal Brexit does become a reality, you’ll struggle to find many who don’t foresee the consequences as being pretty dire. There doesn’t seem to be very many positives, in the short term at least, and the many negatives would almost certainly far outweigh them,” says David Lamb, head of dealing at Fexco Corporate Payments.

Some analysts have a brighter outlook. US investment bank Morgan Stanley says Britain is likely to secure a deal with the EU and that the pound will strengthen by the end of the year.

Savings

The Bank of England gave some long-awaited relief to savers at the beginning of this month when it raised rates above the emergency level introduced after the financial crisis. Mark Carney, however, signalled his willingness to reverse the quarter-point increase in the event of a disorderly Brexit.

“Savers who have their money in cash may see their returns fall … which would be devastating to those who rely on their savings to supplement their income,” adds Springall.

Those with investments in the stock market – through shares or shares-based Isas – could face the prospect of turmoil on the exchanges if there is no deal and companies struggle to cope with the repercussions.

“Many Isa savers associate investments with uncertainty and caution, but too much caution can have a negative impact on your money. And although we’ve seen a small rise in interest rates, keeping your money in cash is just guaranteeing that it loses value,” says O’Neill. “On the other hand, if you put too much of your cash into high-risk options such as stocks and shares, you put yourself at the mercy of market fluctuations – and a no-deal Brexit could mean a big drop in the value of investments.”

Housing market

House-price growth slowed in June to the lowest annual rate in five years, driven by falling prices in London, according to the Office for National Statistics last week.

A few days earlier, estate agent Savills posted an 18% drop in half-year profits and warned that deadlocked negotiations made it difficult to make predictions for the rest of the year.

A no-deal Brexit would be “disastrous”, according to Neal Hudson, housing analyst at Residential Analysts, with the possibility of a crash as a result of rising inflation, job losses and a recession. Others argue that a paralysis of the market is not necessarily a given. “Although we saw some evidence of a reaction from homebuyers after the vote, with a few putting a move on hold or pulling out, it was very short-lived and only affected a small minority.

“In most cases, homeowners have tended to decide not to put everything on hold over a potentially protracted period,” says David Hollingworth of London & County.

He believes that while the uncertainty has led to a slowdown of price growth in some regions, other factors are at play, such as affordability and tighter buy-to-let rules.

He adds: “Currently, low mortgage rates and low unemployment means there is a solid foundation. Of course, there could be speculation around organisations shifting job locations, for example in financial services, which could have a knock on for house prices. But even then, it may be regionalised and limited in scope.”

A varied portfolio

Despite the signs of gloom, Brexit does not have to be a disaster for personal finances, according to O’Neill. Instead, money has to be invested to avoid any turbulence.

“This means spreading your money between UK and overseas investments, plus buying lots of different types of investments, such as company shares, commercial property, government and corporate bonds, plus gold. You can buy funds that specialise in these areas. Funds will pool your money with that of other investors to give exposure to more investments than you could buy by yourself,” she says.

“The alternative is keeping your money in the bank, where it may be safer, but doesn’t have the potential to grow. If you use Brexit as a reason to delay or stop investing, you’ll probably find another reason afterwards. You can always find something that makes you feel nervous about investing.”

Brexit is Least Concerning Issue for Majority of UK Landlords

Almost two-thirds of landlords have no plans to sell their buy-to-let properties over the coming year…

Landlords remain optimistic about the buy-to-let market despite recent regulatory and tax changes, according to the latest Landlord Sentiment Survey by lettings agency Your Move.

In a survey of over 1,000 landlords, more than half (52%) felt positive about current market conditions, with almost two-thirds (64%) stating they were unlikely to sell a buy-to-let property in the next 12 months.

Just 16% expressed negative feelings towards the market, whilst 30% responded to the survey as being “indifferent”.

The poll also revealed that for 83% and 80% respectively, the most important considerations for landlords are the costs of upkeep and property maintenance, and the ability to make a long-term profit.

Brexit was the least pressing issue for landlords, with just 32% expressing concerns towards it, whilst under half (43%) regarded the upcoming tenant fees ban in England & Wales as a potential problem.

“Given the number of regulatory and tax changes in the buy to let market over the last few years, it wouldn’t be surprising if landlords felt some trepidation about the future,” said Martyn Alderton, national lettings director for Your Move and Reeds Rains.

“However, it’s great to see that the landlords we surveyed do, for the most part, remain positive about the future.”

He concluded: “Our research shows the majority of landlords are in it for the long term and that’s important for the well-being of the private rental sector, providing much needed homes for those who cannot yet afford, or do not wish to purchase due to lifestyle choices.”

Scotland and Midlands Lead Greenfield Land Values Growth

Strong demand from housebuilders driving up cost of land and house prices in the Midlands

An increase in the supply of permissioned land has lead to supressed levels of land value growth, according to the quarterly UK residential development land index by Savills.

Greenfield land values grew by 0.8% in Q2 2018 across the UK, bringing annual growth to 2.7%. The strongest quarterly increases recorded were 2.0% in Scotland, 1.5% in the East (includes East Midlands and East of England), and 1.3% in the West (includes West Midlands and South West).

On an annual basis, greenfield land values were up 4.4% in the West and 4.8% in Scotland, with the index noting that the strong growth in land values in the Midlands has been driven by rising demand from housebuilders.

The reason for the muted growth in land values across the UK, however, is due to a sharp rise in granted planning permissions.

In 2017, over 391,000 new homes had planning permission granted, a 21% increase from 2016.

According to the index, demand for land is also being driven by housing associations competing with housebuilders for land as a result of Section 106 requirements.

Strong house price growth is linked to the rise in land values, with Savills reporting that annually prices in the East and West Midlands are up 5.8% and 6.2% respectively, compared to a 3.9% average across England & Wales.

“Land values are currently underpinned by increased demand and a clear political will to maintain high levels of housing delivery, while rising consents and build costs will temper growth potential,” said Savills research analyst Lucy Greenwood.

“The key to boosting housing delivery will lie in unlocking land in locations linked to the strongest housing markets and to those with the most pressing housing need.”

Interest Rate Rise Results in Drop in Planned Home Moves

Homeowners more concerned with mortgage rates than house prices due to Bank of England decision….

 

The Bank of England’s decision to increase interest rates may have deterred homeowners from moving, according to new research from AA Financial Services.

Throughout 2018, the proportion of adult homeowners planning a move in the next six months had stayed consistent at 8%.

However, in the 48 hours following the interest rate rise by the Bank’s Monetary Policy Committee, this fell to 6%.

The AA’s research analysed future demand for property by tracking homeowners’ intentions to move, including the timescale for the move, how much they planned to spend on it, and which regions they were planning to move to and from.

In its most recent figures, collated in July before the interest rate rise was announced, the AA predicted 2018’s summer would experience a high in property confidence, and expected a notable increase in the number of homeowners planning a move over the coming three months.

It also found that the average planned spend on a new home move jumped to in June, up from recorded in April.

Additionally, the July data revealed that 34% of renters were planning to buy a home in the Summer, up from 28% in the Spring, despite concerns regarding property supply.

Commenting on the figures, David Searle, Managing Director at AA Financial Services, said home movers were now concerned more with mortgage costs than house price trends as a result of the interest rate rise.

“After years of record low interest rates, last week’s rise – and indications that more is yet to come – mean that the cost of buying a home is going to get more expensive.

“Given many people are moving home to save money, release equity or to make their money go a bit further it seems that, for some, the reality of living with rate rises may well temper their plans to move in the short term.”

House prices in England and Wales fall for fifth month in a row, new data shows

House prices in England and Wales fell for the fifth month in succession, but some cities bucked the trend with Leicester recording the fastest growth, according to new data.

Overall, average house prices slipped 0.2 per cent in July to £302,251, figures compiled by Your Move show. Despite the fall, the average price is still up 1.6 per cent on a year ago and all regions of England and Wales have recorded “modest” growth on an annual basis.

Slow activity has held prices down with an estimated 75,000 fewer activities in July compared to June; 2 per cent down on June and 6 per cent lower than the seasonal trend. Transactions in the first seven months of 2018 are estimated to be 4 per cent below the same period in 2017.

The West Midlands recorded the fastest annual growth at 3.3 per cent while the South East and East of England were the slowest at 0.5 per cent.

What effect the Bank of England base rate rise at the start of August will have on the market remains to be seen, Your Move said.

The average price of a property In London now stands at £625,529 at the end of June with prices falling in almost two thirds (21 out of 33) of the city’s boroughs on an annual basis.

The biggest drops on an annual basis have been seen in the City of London, down 19.4 per cent (albeit on a small number of transactions), Hammersmith and Fulham, and Southwark, both down 11.7 per cent. In both Westminster and Hammersmith and Fulham, sales of new builds in previous months or years can explain much of the swing in prices.

Overall, the most expensive borough remains Kensington and Chelsea, where prices are down 1.9 per cent on an annual basis to £1,765,033, while the cheapest borough is still Barking and Dagenham, with an average price of 308,547, up 1.8 per cent annually.

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Rents to Climb by 15% By 2023

Upgraded projections follow a drop in new landlord instructions

Over the next year, rents are due to increase by 2% nationally, due to further drops in the supply pipeline and a rise in tenant demand exerting upward pressure on rental growth.

This trend, reported by the latest survey from the Royal Institution of Chartered Surveyors (RICS), is said to become more impactful in the medium-term, with a cumulative surge of 15% expected by the middle of 2023.

The survey shows that a net balance of 22% of survey respondents reported a drop in new landlord instructions, falling in negative territory for the eighth consecutive quarter.

According to RICS’ chief economist Simon Rubinsohn, the lettings data reflects the impact of recent tax changes on the supply of buy-to-let properties. Commenting on the figures he said:

“The risk, as we have highlighted previously, is that a reduced pipeline of supply will gradually feed through into higher rents in the absence of either a significant uplift in the build-to-rent programme, or government-funded social housing.

“At the present time, there is little evidence that either is likely to make up the shortfall. This augurs ill for those many households for whom owner occupation is either out of reach financially or just not a suitable tenure,” he concluded.

Home equity release may cost pension firms billions

UK pension companies may be harbouring billions of pounds of losses from home equity release loans, according to research seen by the BBC.

Under equity release, homeowners borrow money against their house’s value and don’t repay anything until it’s sold.

That’s fine for the borrower, but there are fears lenders have underestimated how much these loans could cost them.

At least one firm assumes house prices will rise 4.25% a year. If they don’t, firms face losses – or even bailouts.

Pensioners whose firms invest in the loans would be protected through the Financial Services Compensation Scheme (FSCS) which is funded through a levy on the industry meaning losses would be ultimately borne by all pension holders.

Parliament probed insurance rules last year and one MP wants to reinvestigate.

John Mann, MP for Bassetlaw and vice chair of the Treasury Committee, which investigated the market last year, told the BBC: “We need to hold a new hearing, a new session, to go into the issue.” He added: “I think some financial institutions have pushed the boat out too far with this, and that creates a potential systemic risk.”

Parliament’s report was seen as broadly supportive of the industry, focusing on competition and innovation.

Equity release works like this:

  • Borrowers over the age of 55, take out a percentage of the value of the house.
  • They pay nothing; the money is paid back when the borrower dies or moves into care. Interest is added each year or month, and because of compound interest, the loans can grow in size very quickly.
  • Borrowers are safe. The loans come with a guarantee that they won’t have to pay more than the value of the house. Any difference is absorbed by the lender.
  • But the loan can exceed the value of the house it is secured against, especially if borrowers live longer than expected or the value of the house drops, and that threatens some lenders.

‘Bad enough’

The Prudential Regulation Authority (PRA), which oversees the companies offering these loans, says it is considering whether to tighten the rules. But critics say it has been too slow.

“It evokes the global financial crisis, but this is an insurance crisis,” said Kevin Dowd, professor of finance and economics at Durham University and author of the report. “It’s not on the scale of the financial crisis, but it’s bad enough.”

If new rules don’t emerge, house prices continue to rise and there are no surprises for insurers when it comes to people living longer, equity release lenders may never realise these losses.

Image caption Professor Kevin Dowd says poorly priced guarantees could bite insurers

Which is the problem, says Professor Dowd. A property price crash or a period of consistent negative growth would see equity release loans become a loss-maker for their providers. So, says Professor Dowd, equity release providers are gambling that house prices will continue to rise.

‘Prudent Resources’

Just Group, to which borrowers owe more than £6bn of these loans, said last month that a PRA draft “does contain proposals, which if implemented would result in a reduction in Just’s regulatory capital position.” This would mean a smaller financial cushion to absorb losses.

Professor Dowd’s calculations suggest its guarantees could cost it £2bn if accounted for correctly in his view. Just Group declined to comment on his estimate.

It said: “At Just we set aside substantial prudent resources against UK residential property risks. We calculate these on a basis equivalent to a 28% fall in the property market and property prices never rising thereafter which is much stronger than the more severe economic scenarios that the Bank of England prescribes for the banking sector. […] Protecting the guarantees we have made to our policyholders is, and has always been, of paramount importance to Just.”

It declined to comment on the size or nature of these resources, or how they might be affected by a change in the rules.

The PRA watchdog is considering whether to change the rules to stop companies assuming house prices will rise.

Equity release mortgages are increasingly popular as older homeowners seek to top up their retirement funds.

In the three months to the end of June, homeowners aged 55 and above borrowed a record £971m through equity release, according to the Equity Release Council.

Image caption Anne and Chris Lee took out an equity release mortgage,and are covered by a no negative equity guarantee

Case Study: Anne and Chris Lee

They are in their early 60s and borrowed about 30% of the value of their home to finance renovations and help fund their retirement.

Their loan was £112,000, at a rate of 6.78%. It will take just over 10 years for that amount to double.

But they are sitting pretty. And that’s because of the no negative equity guarantee, borne by lenders.

Sharing Professor Dowd’s concerns is Dean Buckner, a former senior technical specialist at the PRA who retired in May. He said progress at his former employer in fixing these loans had been slow. Part of that may be the nature of the regulator and the many roles it must fulfil.

“The regulator is there both to protect firms and to protect the general public,” he said. “The Bank of England has part of its mission statement to protect the good of the people or something like that. I think it’s a horrible failure of regulation and I’m very sorry about that.”

The PRA said in a statement: “Following a review announced in 2015, more robust expectations of firms were published in 2016 and confirmed in 2017. Clearer and more precise tools to determine whether firms are meeting these prudent expectations have been out for public consultation since July 2018.

“They benefit from experience of Solvency II in practice and the collective expertise within the PRA, in which a plurality of views is actively encouraged when determining policy”.

Savers ‘missing out on better rates’

Since Thursday’s rise there has been very little movement in rates, although generally it takes at least a week for any rises to be announced and a month for any of those better returns to take effect.

Tom Adams, of comparison site Savings Champion, said that rather than waiting, many people could get a much better deal by moving off an old deal that might pay about 0.5% in interest, or as little as 0.05%, to one of the better buys.

The leading rates for instant access savings accounts are well over 1% so, for many, simply switching to a new savings account would be more lucrative than hoping the base rate increase is passed on to their existing account.

“This year we have seen competition between the newer challenger banks rather than the big High Street names,” he said.

The reason for this, in part, is that the largest banks, particularly, did not need to attract savers. They had money sloshing around from schemes that allowed them access to cheap funds to lend out.

Challenge for customers

The competition view was echoed by Bank governor Mr Carney, who told BBC’s Today programme on Friday that while competition was not the Bank’s direct responsibility, it had created a better-prepared wicket for this to be played out.

“In order to have competition, you need all of the banks to be healthy,” he said.

“That required a lot of repair post-crisis, and… you need a lot of new banks in the system, so we’ve authorised 40 more banks.”

The City regulator has suggested that a minimum savings rate should be considered for longstanding customers, but a widely held view is that savers need to ditch their loyalty and move their funds around.

However Mick McAteer, director of the Financial Inclusion Centre, said that switching would not benefit many households with squeezed finances.

He said many millions of savers did not have sufficient amounts tucked away for a small rise in interest to make much of an impact.

Even a 1% rise in the savings interest rate would only add 20p a week or so to many people’s savings, he said, which was an “immaterial rise” and one that would do little to encourage people to save more.

Interest rate rise UK: Bank of England raises rate to 0.75 per cent in August 2018 – what does it mean for your mortgage?

Around a third of London, borrowers could see the cost of their mortgages rise by hundreds of pounds following August’s interest rate rise.

The Bank of England has voted unanimously to raise UK interest rates to their highest level in almost ten years.

The decision to raise the base rate to 0.75 per cent from 0.5 per cent pushes the Bank rate to its highest level since March 2009.

It is only the second Bank rate rise since the financial crisis in 2008, after a rise in November 2017 pushed interest rates back up from a historic low of 0.25 per cent to 0.5 per cent.

Today’s announcement will come as little surprise after most economists predicted the monetary policy committee’s decision.

The Bank of England raised interest rates today to the highest level for more than nine years

Another interest rate rise of 0.25 per cent was widely expected to take interest rates to 0.75 per cent in May.

However, the disruption caused by the “Beast from the East” that hit this March led to the economy growing by just 0.1 per cent in the first three months of the year and the Bank opted to keep interest rates at 0.5 per cent.

Two more rate rises are expected in 2019 and 2020.

Will I still be able to afford my mortgage after today’s interest rate rise?

“According to Nationwide Building Society, only a third of London borrowers are on variable rates. This means the vast majority of borrowers will see no impact on their mortgage payments have taken advantage of the low fixed rates that have been on offer,” said Colin Payne, associate director at Chapelgate Private Finance.

However, the third of London homeowners on variable rates will see their average mortgage payments pushed up by more than £300 a year as a result of the rise.

Today’s interest rate rise will push up the average mortgage by £26 per month to £1,180, further squeezing household incomes.

 

“In real terms, wage rates are still at levels prevailing in 2005. Moreover, a small proportion of households already have a relatively high debt service burden. For those, some of whom will be on variable rates, any rate rise will be a struggle, even though the impact on the wider economy and most households are likely to be modest,” said Robert Gardner, Nationwide’s chief economist.

That said, while a rise in interest rates may come to a shock to anyone who bought their first home in the past decade, higher mortgage interest will have been factored into lenders’ calculations since new rules were introduced in 2014 to curtail high-risk lending, so don’t panic.

Should I fix my mortgage now?

People on a variable rate mortgage benefit from interest rate changes when the base rate drops. However, mortgage experts agree that today’s announcement heralds a general upwards trend in interest rates.

MarkCarneyinterestratesmortgage.jpg
Mark Carney, governer of the Bank of England, announced the Bank rate rise to 0.75 per cent today (Bloomberg)

This means that borrowers on a variable rate should seek out a new deal now if they can.

“If November’s rate rise was important for its symbolism, today’s rate rise is equally important for its message to the market: the record low interest rate era is over, and interest rates are now headed in one direction,” said Craig McKinlay, sales and marketing director at Kensington Mortgages.

“This rise should be a call to action for those borrowers who haven’t yet remortgaged to get in touch with a mortgage broker and seek a new competitive deal.”

Will house prices go up or down now interest rates have risen?

The 0.25 per cent rate rise may push down already falling London house prices, as the cost of home ownership looks set to rise further.

“It’s not the relatively modest increase in interest rates which is significant – the message it sends about their future direction is far more important,” said London estate agent and former residential chairman of the Royal Institution of Chartered Surveyors, Jeremy Leaf.

“The change is likely to compromise already fragile confidence to take on debt in the property market and wider economy.”

London house prices fell for the fourth month running in May to £479,000, a drop of £2,000 off the value of the average home in the capital.

Prices were expected to continue to decline slightly for the next couple of years due to uncertainty over Brexit, combined with the likelihood of further interest rate rises.

“In our regional forecasts we predict price falls in London in 2018 and 2019 of 1.7 per cent and 0.2 per cent respectively,” said Richard Snook, senior economist at consultants PwC.