Today’s hike in interest rates is certainly important, symbolically at least, with Bank rate moving above the emergency level introduced straight after the financial crisis for the first time.
However, for the Northern Ireland households, the impact is perhaps less than the attention that the move has attracted might suggest.
Most mortgage holders now have fixed rates deals rather than variable, so many existing mortgage holders won’t therefore be directly impacted. And the reality is that today most under-40s in Northern Ireland don’t actually even have a mortgage, as they are renters rather than homeowners. Therefore the cost of renting is of more relevance to them than the cost of borrowing.
Those people who had a mortgage before the financial crisis and still do are paying much less than they did previously. However, for those renting homes, the cost of housing has gone only one way….up. Unlike homeowners, private sector renters didn’t benefit from the Bank of England’s emergency interest rate cuts (unlike their landlords).
The annual cost of the average rent in Northern Ireland has increased by almost 11% or £696 between 2013-2017 or up £13% / £924 for those renters in Belfast, and the ratio of median rental value to median incomes in Belfast is now a hefty 44.5%, and almost 37% in Derry & Strabane.