Finanze® Daily Digest - 03/11/2022

The Brief: The Bank of England (BoE) raised interest rates by 0.75 percentage points today, which is the largest increase in 30 years.

Why It Matters: BoE Governor Andrew Bailey announced in a press conference that he understands the difficulties that mortgage holders are facing today but further reasoned, "If we don't take action to bring inflation down, it gets worse”. According to Financial Times, the BoE, in one of its possible scenarios, forecasts a recession for five quarters due to higher energy prices and mortgage costs.

Finanze® Foresights: Mortgage lenders have already factored in the rate hike to today’s current borrowing costs. But the consequences have already transpired early on with average house prices dropping 0.9% in October compared to the previous month, and mortgage approvals, buyer queries and sales also taking a tumble, according to the Royal Institute of Chartered Surveyors (RICS). As Finanze® CEO Alastair Hoyne puts it, “If rates continue to rise, lenders will have no choice but to trim their margins to keep lending rates competitive, especially those without deposits to fall back on. However, there is a silver lining. Property investors that have built a war-chest ready for the anticipated property price drops will be well-suited to take advantage of those forced to ‘fire-sale’ and the auction markets which are expected to swell.”

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