Blick Rothenberg

Interest rates rise puts pressure on the Government to reform SDLT regime

02.11.2017

The interest rate rise will largely hit first time buyers and people moving home with increased borrowing costs, putting pressure on the Government to reform SDLT in the Budget on 22 November, says Blick Rothenberg.

In a largely expected move, the official bank rate has been lifted from 0.25% to 0.5%, the first increase since July 2007, but putting it back to the level it was in summer 2016. Some banks had already started to increase the rates they were offering on fixed rate mortgages, in the expectation that rates would be increasing.

Nimesh Shah, partner at Blick Rothenberg, said: 'The largest affected group will be homeowners with standard variable rate or tracker mortgages, who will see their monthly mortgage payments increase'.

'The rate rise is bad news for first time buyers and people moving home as they will see the cost of borrowing increase. There is more pressure now on the Government to reform SDLT in the Budget on 22 November to help first time buyers, and there could be a form of SDLT holiday announced'.

He added, 'Landlords are not going to be pleased by the rate rise and they have been particularly squeezed in recent times, with the increase in SDLT and the mortgage interest relief restriction now taking effect. It is a double blow for landlords who will see an increase in mortgage costs without being able to achieve tax relief on the increased cost'. 

Landlords may look to pass on the increase cost through higher rents, which is again concerning for those looking to save to buy a home. Alternatively, landlords facing higher costs may look to sell all or part of their property portfolios.

Nimesh said, 'The interest rate rise is good news for savers, but it is important to remember that rates have been painfully low for a long period of time and some banks had reduced savings rates irrespective of the base rate. It remains to be seen whether the banks will pass on the interest rate rise to savers.'

'The rise has effectively halved the amount a basic rate or higher rate taxpayer would need to use their personal savings allowance ("PSA") but a basic rate taxpayer would still need cash savings of £200,000 to generate £1,000 of interest in order to fully use their PSA.'

For more information, please contact Nimesh Shah.