Looking back – Property Week in Review

What an eventful week it has been in the property industry! From the start, we encountered some challenges, and unfortunately, things didn’t get much better as the week progressed.

We find ourselves in a déjà vu situation as lenders have again adjusted their mortgage products, leaving us with higher rates. HSBC and TSB took the lead on Wednesday, raising their rates shortly after the Bank of England increased the base rate by half a percent.

Now, the average two-year fixed rate stands at 6.37%, an alarming figure reminiscent of the days following Liz Truss’s mini-Budget. Just a year and a half ago, this rate was a mere third of what it is today. This means borrowers with a £250,000 mortgage are burdened with an additional £6,000 to find, post-tax.

While we understand the reasons behind the rate hike and the need for market stabilisation, it begs the question: what is being done to combat the relentless inflation?

The Bank of England has resorted to its only available tool, the sledgehammer of interest rates, albeit a bit belatedly. The recent half-percent increase marked the 13th consecutive rise, aiming to tackle the inflation challenge finally.

Undoubtedly, this approach will have an impact, eventually. Taking money out of people’s pockets through interest payments during a time of escalating living costs will naturally reduce spending. However, expecting individuals to “hold their nerve” as Rishi suggests as if we can simply defy the banks demanding more interest each month, feels somewhat optimistic.

These interest rate hikes primarily affect homeowners with mortgages and landlords with mortgage obligations. Unfortunately, the burden is then transferred to their tenants through increased rent. Interestingly, these three groups predominantly consist of younger, working individuals who often have families to support.

In contrast, older homeowners and mortgage-free landlords only stand to benefit from this situation, as their savings grow faster than they have in over a decade.

Consequently, the generational divide is widening at an accelerated pace. How much longer can those under 50 bear the brunt of the situation, particularly when facing the highest tax burden in 70 years? It seems that high rates are here to stay for at least a year or two, putting many families at risk of financial ruin.

Curbing inflation requires a decrease in spending. However, shouldn’t we explore alternative methods that do not disproportionately impact those who can least afford it?

Jonathan Rolande

Jonathan Rolande (MNAEA MICBA MARLA) began in the property business in the late 1980’s and is a Director of House Buy Fast and helped to found The National Association of Property Buyers in 2013. He has worked closely with The Property Ombudsman to develop a Code of Practice for Residential Property Buying Companies.