Last week’s surprise interest rate rise is unlikely to take the heat out of the agricultural property market, according to agents.
The 0.25% hike, announced on 11 January by the Bank of England, was the third quarter-point rise in under six months and takes the total cost of borrowing to 5.25%, the first time the bank’s lending rate has exceeded 5% since August 2001.
Although some commentators warned that the move would cause severe pain for consumers and those with residential mortgages, agricultural agents were more sanguine, even though some analysts are predicting another rise soon.
Robert Fairey of Brown & Co’s Bury St Edmunds office said rates could rise to 6% before there would be an impact on land values, which grew by about 7-10% on average last year. “There is too much demand compared with supply. There is also a lot of cash in the system and people aren’t gearing up too much to buy property.”
Even commercial land of interest mainly to farmers should remain firm, said Bidwells’ Cambridge-based agent Jim Bryant. “The fact that people are talking about more rises might introduce a bit of uncertainty, but rates are still historically low and farmers buy for the long term. The rise in commodity prices has also softened the blow.”
Interest in commercial land should stay firm, says Bidwells’ Jim Bryant.