By Ed Emerson
One of the sharp distinctions between the pre-Brexit and post-Brexit worlds, which should interest every self-employed mortgage seeker in the UK, is how the predictions of higher interest rates, and thus more expensive borrowing, fell by the wayside.
Sure, the financial markets huffed and puffed from 24 to 27 June, but since then indexes like the Dow Jones have topped previous record highs while interest rates appear headed in the opposite direction.
And that, my self-employed mortgage seeking friends, is both unexpected and good news indeed.
From the day of the EU referendum, interest rate yields on government bonds plummeted, which in turn reduced the borrowing costs for lenders.
Roll the clocks forward into July and it appears the governor of the Bank of England (BoE), Mark Carney, is about to do the unthinkable by reducing the already historically low rate base rate of 0.5% to 0.25%…..or even lower.
Now, that suggestion comes with a strong health warning; we can no more predict the BoE’s movements than we can the market at large, but many believe a rate cut is coming in August.
Those on the lookout for self-employed mortgages would have been happy enough with a slight rise, and giddy at the prospect of the ‘cheap money’ era even remaining at the same interest rate.
We should be elated by the latest rumours.
What this means for borrowers is that fixed rate options, while already ridiculously low by comparison to any in living memory, may prove even cheaper in future to access.
The expectation is for the banks to adjust downwards by end July / early August as the BoE delivers its next interest rates decision in August, alongside its quarterly Inflation Report.
The BoE’s Monetary Policy Committee meets once a month and sets the bank rate.
Its government-set task is to keep inflation to a 2% target while maintaining financial stability.
Thus, the windsock on inflation helps determine changes to the base interest rate.
Want to know more?
Why not see what HNW Magazine’s Self-Employed Mortgages section here has to offer you in terms of advice, guidance and options.
And look out for HNW Magazine’s report The 5 Steps to Getting a Mortgage When You’re Self-Employed for consultants, freelancers and entrepreneurs, out soon, and take advantage of the mistakes others have made so that you don’t have to.
Ed Emerson, Editor, HNW Magazine