Adrian Pingstone FM Magazine sounded out Paresh Raja, CEO of Market Financial Solutions (MFS) and Shojun CEO, Jatin Ondhia, on the 50 basis point hike in interest rates announced today by the Bank of England.
Paresh Raja, CEO, MFS, says: “The property market is being pulled strongly in two different directions. Today’s interest rate hike is significant, impacting both prospective homebuyers along with existing mortgage customers; this threatens to act as a bucket of cold water on what remains a red-hot market.
“But then, the strong rumours of a stamp duty cut in tomorrow’s mini budget will spin matters in another direction. Coupled with the decision to scrap affordability tests, it is clear that the Government will do all it can to fuel a lucrative, buoyant property market.
“We saw it with the stamp duty holiday during the pandemic – when backed into a corner, the Conservative Government is keen to err on being pro-property. It will be fascinating to watch how rising interest rates and high inflation play off against the touted stamp duty cut. I suspect, as recent years have shown, the property market will continue to thrive in the face of significant demand and limited supply.”
Jatin Ondhia, CEO, Shojin, adds: “The continued rise of interest rates will naturally cause a stir across financial markets. It’s clear the Bank of England is fighting inflation six ways to Sunday – it is unlikely to remove its foot from the economic brake pedal for the foreseeable future. So, even though we have grown somewhat accustomed to it, the turbulence of rising rates and inflation will spook some investors.
“When it comes to navigating the testing climate, agility and diversification will be particularly important. This is no time for knee-jerk decisions, yet at the same time, a laissez faire approach could leave investors over-exposed to the current macroeconomic headwinds. Investors must have the foresight to evaluate their strategies against the complex dynamics at play and consider which assets are likely to offer the best shelter.
“Against the current backdrop, it should be expected that many investors will look to balance traditional and alternative investments. Real estate could prove particularly popular if indeed the Chancellor does announce a stamp duty cut in tomorrow’s mini-Budget. Bricks and mortar always attract significant demand from domestic and international investors, but I would predict this demand will rise notably if tax incentives are introduced.”
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