Bank of England being questioned over low interest rate

In an attempt to prevent the UK economy from collapsing any further, three years ago the Bank of England made the decision to lower interest rates to 0.5%, a record low in the history of the country.

This decision was something that was very good news for people with a mortgage as it has meant that their repayments have remained incredibly low. Those benefiting the most have been those who subscribed to a tracker deal.

Many people are asking whether the Bank of England have been right to keep interest rates so low for such a long time. The rate increases the inequality in the housing market which has been greatly exacerbated as there is no pressure on people to sell, which means the supply in the market remains low.

Those who own a house and would be potentially interested in selling, are willing to wait until they achieve the highest price possible for their property. This means that buyers are largely limited to a small, and wealthy, group of individuals.

The low interest rates have also meant that price adjustment is happening through an increase in rent, rather than a fall in the price of houses. These increasing costs of renting are falling largely upon a new generation of people who are unable to get onto the housing ladder.

Unfortunately, the windfall from decreased mortgage rains has largely fallen on investors who have bought properties to let them out. These people have significantly displaced young buyers in the market.


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