Fears that the Bank of England would increase the interest rate and end the boom in the buy-to-let market have been quashed after the nine-strong rate-setting committee voted to maintain the current interest rate at 0.5%.
Thousands of people wishing to buy property, or get on the housing market have benefit from the 0.5% interest rate, with property buyers and first-time buyers in particular benefiting from the low mortgage rate. Despite fears that policy-makers would vote to increase the rate, only one did with an 8-1 vote to maintain the 0.5% rate for the 78th month of record low-interest rates.
The standard bank did state that although they had voted to keep rates at the same rates for now, they did expect to be near pre-recession levels in two years. The Bank's desire for higher inflation has been dented by a drop in oil prices and energy costs as well as a rise in the value of sterling. Experts estimate that the pound has risen 3.5% since May.
Fear Over Rise in Rates
The vote to maintain the rates that have aided the property market comes despite a warning from governor Mark Carney that warned that the rate decision will "come into sharper relief around the turn of this year".
Prior to the announcement, many expert groups had urged the Bank of England to maintain the current rates, especially amid the crisis in Greece and the collapse of the Chinese market. Experts believed that by keeping the current rate growth in the economy would be encouraged and would occur.
The Council for Mortgage Lenders estimated that had the rates risen the total number of repossessions would have risen to 16,500 in 2016. Citizens Advice predicted that around a third of those would have been buy-to-let properties.
Although the Citizens Advice group were relieved that the rates had been maintained, they issued a stark warning about potentially taking a risk with the rate at the next vote or rushing the interest rate back up. Their report read: "Presuming that when the interest rate rises do come, they will have a slightly greater effect on buy-to-let landlords than on owner-occupiers due to the effects of rising household incomes and well-established forbearance procedures, buy-to-let repossessions might then rise to around 5,280 in 2016 and, extrapolating forwards, perhaps around 5,760 in 2017,"
"Looking further forwards to when interest rates peak, if total repossessions then rose to around 30,000, similar to the level at the end of 2012, then the same ratio would give an annual estimate in that year of 9,600 buy-to-let repossessions, or an increase of around 4,800 from the level expected this year."
John Longworth, director-general of the British Chambers of Commerce said: "It would have been imprudent to push through a rate rise at this moment when our economic recovery remains in need of care and encouragement.
"Rates will eventually have to rise and when they do, it should be done slowly and steadily. Until that moment, the Bank of England is right to keep interest rates at current levels."
Buy-to-Let Properties
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