How Will the Russia/Ukraine Situation Impact Mortgage Interest Rates?

As the Russia/Ukraine situation rapidly escalates, economies worldwide are continuously reacting. As the situation escalates further, what are the implications for mortgage interest rates and property investors?

Already, speculation around the Russia-Ukraine tensions is impacting stocks and shares across the world, with Energy, communications services and financials the worst-performing sectors last week. With the latest development of Russian troops moving into Ukrainian territory, the UK and US governments are likely to place further economic sanctions on Russia, which we expect them to reciprocate. Around 40% of the EU’s oil and one-fifth of gas comes from Russia, the costs of which are already rising. Therefore, the knock-on effect of any economic sanctions could mean further price increases for these materials, which is highly likely to mean yet further rises in energy prices and other goods.

The concern, therefore, is inflation. Already predicted to hit 7% this spring, any additional pressure due to this conflict will likely push it towards 10%, which will have a dangerously detrimental impact on many people’s finances. While we expect the Bank of England to increase base rate (BBR) at least twice more this year to help curb the current rate of inflation (caused by the pandemic, Brexit and supply-chain issues), any additional pressure at this point will require a re-think. Should the situation continue to escalate, the Bank of England may need to consider increasing the base rate higher than initially planned.

By raising base interest rates, people will be encouraged to save rather than spend. The primary knock-on effect is that with fewer people spending, demand for products will decrease and, therefore, prices. However, should BBR increase further than the predicted 1-1.25%, we can expect mortgage interest rates will too. While it may seem implausible that a tense political situation 1,500 miles away could impact your mortgage interest rates, hopefully, you can see why these events are all connected and have real economic consequences for property investors.

If you need to remortgage in the next six months, give us a call today to secure a mortgage at today’s interest rates. Speak to our expert team on 0345 345 6788 or email enquiry@mortgagesforbusiness.co.uk.

NB: ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

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