Southampton: JLL expects annual rises to interest rates in years ahead

JLL, the property consultancy, believes annual rises in the base interest rate will be the norm in the years ahead.

Emma Eaglestone, lead director at JLL in Southampton, said:"Today's announcement from Bank of England Governor Mark Carney to increase the base interest rate from 0.25% to 0.5% is a necessary step in monetary policy to begin the process of ending the era of cheap credit.

“The last time the base rate was increased in the UK was more than a decade ago in July 2007 meaning many of the UK’s 8.5m homeowners with a mortgage have not had to face increased monthly payments triggered by a base rate rise.

“JLL expects the base rate to rise slowly at around 0.5 percentage points per annum to a level of 2.25% by the end of 2022. To put this into perspective, the long term average historic base rate in the UK is 5% meaning the relative cost of borrowing in the UK should remain cheap by historic standards.

“However, any increase to the base rate will particularly hit homeowners and buy-to-let landlords with high loan-to-value variable or trackers mortgages. Although there has been a recent return to real wage growth across the country, household spending will need to be adjusted to ensure rising payments can be made.

“Rising rates may also make it slightly more difficult for first time buyers to get on the ladder as the cost of borrowing increases. It is vitally important that we increase the delivery of new housing in the UK with a wider range of tenures developed, offering not just cheaper entry points to home ownership, but secure, affordable rental options.”