News

Bank of England lowers interests to level not seen since seventeenth century

In a truly unprecedented and historic move, the Bank of England has lowered the country’s base interest rate to 0.5%, for the first time since at least 1694. The country’s central bank was established at the end of the seventeenth century and never in its history have interest rates been so low. This will come as very positive news for those on fluctuating mortgages, of both the private and buy-to-let variety, as they will likely see their monthly interest payments decline, once the Bank of England’s rate decrease prompts other financial institutions to cut their rates as well. The problem, however, may be that a large number of residential landlords and homeowners on fixed rate mortgages will continue to be locked in to a higher rate, thus limiting this much needed financial relief’s financial impact.

Despite these limitations, lower rates may still provide a boost to both the economy in general, and particularly to the housing and residential property sectors. Landlords, however, may have even more to gain from another approach that the Bank of England adopted today, to complement lower interest rates. The bank will proceed with an economic mechanism often called “quantitative easing.” At the most basic level, quantitative easing refers to the bank’s ability to purchase a portion of the debt held by the government and, in some cases, even corporations. This would probably have a trickle-down effect for landlords looking for a buy-to-let mortgage, as commercial banks and other financial institutions may be more likely to provide loans due to the injection of cash into the economy.