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House prices won’t be hurt by rate rise says Moody’s

Paloma Kubiak
Written By:
Paloma Kubiak

Ratings agency Moody’s suggests the expected base rate rise this week will not adversely affect house prices in the UK.

According to a report in The Guardian, Colin Ellis, economist at Moody’s, said that a rate rise has been expected for some time, and is simply the removal of the emergency stimulus introduced to the economy after the Brexit vote.

“A rise of 25 basis points [0.25%] is not going to move the dial. A rise of 0.25% pales into insignificance compared to the 8%-10% decline in the currency,” he said. “The [property] market is holding up OK. There is an underlying resilience in prices even if transaction activity has been affected. If you look at the balance between the cost of renting or buying, then UK house prices are not overexposed.”

Base rate is expected to be raised to 0.5% this week, the first increase in base rate in a decade.

However, while Moody’s was positive about the housing market as a whole, it was less optimistic about the prospects for the buy-to-let market, warning that landlords should expect to see falling rental income and increasing tax bills.

Moneyfacts this week reported that the rates on offer on buy-to-let mortgages have started to rise, with the average two-year fixed rate currently standing at 2.84%, compared to 2.79% in October, while five-year deals have seen similar rate growth.