Eli5 – If the BoE interest rate keeps rising, ultimately pushing up the monthly rent price, at what figure (%) is best for tenants and home owners?.

Question

Eli5 – If the BoE interest rate keeps rising, ultimately pushing up the monthly rent price, at what figure (%) is best for tenants and home owners?.

In: 1

Answer 1

Landlords don’t raise prices because the BoE raises rates. They raise prices because of inflation (either inflation in the housing market, or in the cost of goods and services).

The BoE raises rates to try to slow down inflation. The more expensive it is to borrow money, the slower businesses expand and the less salaries go up.

The BoE adjusts its rate to try to keep inflation at around 2%. This is probably the “best” rate for tennants and homeowners according to conventional economic wisdom.

But the interest rate that will achieve this inflation is dependent on the current state of the economy. It’s not a fixed number. When the economy slows, low rates help increase inflation. When the economy overheats, high rates help reduce inflation.

So it’s not exactly possible to answer your question in the way you asked. Hope this gets at what you were trying to understand, though.