In a widely signalled move the MPC voted to increase the Bank of England Base rates from 0.25% to 0.5%. A small move praised by savers, but we all know banks will pass on only a small part of this rise and only very slowly. And a move lamented by borrowers who are on variable rates (which is about half mortgage holders). But the overall change is a very small one.
After all the base rate was only put down in August 2016 from 0.5% so it has not been at this rate for very long and was put there to minimise the short term impact on the UK economy of the vote to leave the EU.
Base Rate History – never lower than 2% before
In the history of Base Rates in the UK the base rate got to 2% a few times in the 1800’s but never below so there has never been an increase before from 0.25% to 0.5% before. But there has been plenty of history of rate rises in the past.
Before the banking crisis
The last was on the 5th of July 2007 when the rate went from 5.5% to 5.75%. So what happened to Uxbridge housing prices after that time? One year later property in LB of Hillingdon had only dropped a mite from £257,857 to £257,672 but then dropped by around 12% during the banking crisis between 2008 and 2009 although they more than recovered to current prices of £415,630.
Back in 2003
What about the time before that? There was a previous set of increases which started around Jul 2003 when rates reached 3.5% before starting the climb up to 5.75% over four years. In Jul 2004 property prices in Hilingdon were up 7% on the last year.
The long term view
Property average prices will go up and down in the short term but have provided good long term investors for those who weather short term changes. As always with property it is best to take the long term view.