How Will the 0.25% Interest Rate Cut Affect the Colchester Property Market?

How Will the 0.25% Interest Rate Cut Affect the Colchester Property Market?

I had an interesting chat with a Stanway landlord who owns a few properties in and around Colchester. We had never spoken before (he uses another Colchester property agent to manage his properties) but, after reading my Colchester property market blog for a while, the landlord wanted to know my thoughts on how the recent interest rate cut would affect the Colchester property market so I thought I’d share my thoughts here too.

It’s been a couple of months since the Bank of England interest rate cut to the new record low of  0.25% following their conclusion that Brexit could lead to a materially lower path of growth for the UK, especially for the manufacturing and construction industries. For the country as a whole the manufacturing and construction sectors are still performing well below the pre credit crunch levels of 2008/09, so the British economy remains highly susceptible to an economic shock. This is especially important in Colchester, because even though we have had a number of local success stories in manufacturing and construction, a large number of people are employed in these sectors. In Colchester, of the 59,936 people who have a job, 3,700 are in the manufacturing industry and 4,576 in Construction which means:

6.2% of Colchester workers are employed in the Manufacturing sector and 7.6% of Colchester workers are in Construction

The other sector of the economy the Bank is worried about, which also plays an important role in the Colchester economy, is the Financial Services industry. Financial Services in Colchester employ 3,320 people, making up 5.5% of the Colchester working population, as shown in the graph at the top of this page.

Together with this interest rate cut the Bank of England also announced an increase in the quantity of money via a new programme of Quantitative Easing to buy £70bn of Government and Private bonds. Although that won’t directly affect the Colchester property market another measure, also included in the recent announcement, of £100bn new funding to banks will. This extra £100bn will help High Street banks pass on the base rate cut to people and businesses, meaning the banks will have a lot more cheap money to lend for mortgages – which will have a huge effect on the Colchester property market – that £100bn is enough to buy half a million homes within the UK.

It will take until early next year to find out the real direction of the Colchester property market and the effects Brexit will have on the economy as a whole, including any further interest rate cuts and the availability of cheap mortgages. However, something bigger than Brexit and interest rates is the inherent under supply of housing in Colchester and how this is likely to affect Colchester property values into 2017 and beyond. The severe under supply means that Colchester property prices are likely to increase further in the medium to long term, even if there is a dip in the short term. This only confirms what every homeowner and landlord has known for decades – investing in property is a long term project and, as an investment vehicle, will continue to outstrip other forms of investment due to the high demand for a roof over people’s heads and continued shortfall of new properties being built.

I’d welcome your comments and experience of how the recent interest rate cut has affected you personally. I’m always available to chat informally about any aspect of the housing market in Colchester. Please ring 01206 862288, email me at or add your comments below.

I am happy to undertake free no-obligation pre-purchase visits to your shortlist of potential properties to provide a rental valuation. You can send me the link to any properties on Rightmove or Zoopla and I’ll take a look at get back to you – usually within 24 hours.

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