Interest rates of 6% and 7% will be the new normal

We should all get used to interest rates hanging around between 6% and 7% for the medium terms, the Chief Executive of Mortgage Advice Bureau (MAB) has warned.

Speaking on the latest episode of The Home Stretch podcast hosted by The Guild of Property Professionals’ Iain McKenzie, MAB boss Peter Brodnicki says that although the market has been slowly starting to recover from the tumultuous fourth quarter of last year stubborn inflation continues to see the Bank of England pushing rates up.

HELPFUL

“We are now seeing rates start with a six, with another rate rise or two likely, although the larger than expected fall in inflation announced a few days ago is helpful,” Brodnicki tells the podcast.

“I think this is something that we will have to get used to for a while until inflation can be brought under control, as whilst it sits over 3% it is difficult to see interest rates falling.

“When inflation falls, we should see rates decrease fairly quickly, but we should not expect this to happen in the short term,” he adds.

NOTHING NEW

In response, McKenzie says that for those that have been in the sector for some time, transacting in a world where interest rates are high is nothing new.

“That said, what is the impact of the very sharp rise in terms of the consumers’ mindset?” he asks.

According to Brodnicki if you are buying then certainly some will definitely be postponing their decision to do so. It is however a timing issue as you never really lose a housing transaction.

“Earlier in the year there was some reluctance to commit to a fix rate when there was talk of interest rates peaking, with predictions that they may start to fall within 12 months.

“Rates have however continued to rise and now any prospect of rates falling has been pushed back.”

The Bank of England will next meet on 3rd August 2023 to decide what level interest rates should be set at.