The Bank of England has again held the base rate at 0.5%, as the clock ticks down towards 2015 when a new era of rate increases will commence, so say top UK economists.
A recent BBC poll of the top 28 economists, who work with the Treasury on economic forecasts, saw over half of them predict a base rate increase in the latter half of next year. All but 2 of them thought that the base rate would remain at 0.5% for this year.
The rapidly growing UK housing market has been seen as the barometer of how quickly rates will increase, leaving many contractors looking nervously at their own mortgage needs for 2014 and beyond. The average house price in the UK has increased by 8.4% in the past 12 months, with this trend predicted to continue according to the largest building society in the UK, Nationwide.
This means that the non-London UK average for predicted house price inflation in 2014 is now nearly £14,000, and a massive figure of £41,000 inflation predicted in London, according to figures from Nationwide and Halifax.
With many contractors living in or around the capital, some face the very real danger of being priced out of the London market if they sit back and wait. With train season ticket price increases outpacing the rate of inflation, the contractor may end up being squeezed at both ends if having to commute to fulfil contractual obligations.
The news doesn’t get any easier to bear for those freelancers with existing mortgages. The Treasury’s Funding for Lending Scheme (FLS), which has driven mortgage rates to record lows over the past year, is due to cease in the next few weeks. This will inevitably cause lenders to gradually increase the rates on offer to would-be borrowers, regardless of any base rate movement. Increases to lender standard variable rates may follow quickly on the back of increases for new borrowers.
“As a leading economist put it recently, the UK economy is heading from ‘despair to repair’, but one can argue that the repairing process will still cause pain for many hard-working contractors,” commented Taj Kang, Business Development Director at Contractor Mortgages Made Easy.
“The cost of buying a home in and around major cities is becoming harder. Manchester, Aberdeen, Leicester and Birmingham now compete with London, as cities where house price growth is like a runaway train that shows little sign of slowing. These cities also happen to be the areas that provide the most UK contract opportunities.”
“Any contractor considering a property purchase in and around a major population centre would do well to act early and decisively.”
Article By: Lucy Edmunds, Media Executive at Contractor Mortgages Made Easy
Media Contact: Raman Kaur, Public Relations Manager
Tel: 01489 555 080