BBC‘A double whammy’
Interest rates dictate the cost of borrowing set by High Street banks and money lenders for the likes of mortgages and credit cards.
Jersey mortgage broker Peter Seymour, from the Mortgage Shop, described the Bank of England’s decision as “great news for everybody”.
“I really think that it’s going to have a significant impact on the housing market,” he said.
“We’ve been speaking with lenders in the last couple of days, and they will work very, very quickly – in other words, probably within a couple of days to a week -starting to review rates and reduce them.
“And then, once they have all decided to reduce their rates, I think they’re all going to start looking and thinking what the competition is offering, and then start offering even more competitive rates – so it will be like a double whammy, which is going to be great news for borrowers.”
Andre Austin from Swoffers Estate Agents in Guernsey agreed that the reduction was “positive”, although he said that he and his colleagues were “very, very busy” again, following a “challenging” period in 2023 when rates increased.
“People are obviously looking for the best mortgage deals they can get,” he said.
“It (a drop in interest rates) changes affordability. Hopefully it will get some more people on the ladder as well.”
But he added: “I don’t think we’re going to see a stampede of people buying lots of property because of falling interest rates.”
The Bank of England has a target to keep inflation at 2%, and while inflation was well above that, the Bank put interest rates up to 5.25% in a bid to slow price rises.
Inflation has now started to fall, although rates in Jersey and Guernsey remain higher than in the UK.
And in addition to higher inflation, earlier this year, a report by the Jersey Consumer Council (JCC) found mortgage rates offered by lenders in Jersey were about 1% higher than rates offered by the same banks in the UK.
With this as the context, Consumer Council Chairman Carl Walker hopes this week’s interest rate reduction represents a turning point.
“As well as a benefit for those people looking to get onto the property ladder, a drop in the interest rate also gives us that indication that the rate of inflation is now starting to slow down”, he said.
“Things might be getting a bit easier, certainly in the long-term, for consumers.”