The Bank of England’s decision to reduce interest rates to 4% in recent weeks could signal the ‘starting gun’ for couples looking to divorce speculates one family law professional.
Judit Kerese, Associate at Stowe Family Law has suggested the fall could precipitate a ‘rush’ of couples looking to finalise their financial settlements with some couples having delayed divorce proceedings as they cannot afford to buy two separate homes out of the one marital pot. A fall in mortgage rates and improved borrowing capacity could lead to an increasing number of enquiries, suggests Kerese.
“The Bank of England’s new base rate hit a two-year low, reducing from 4.25% to 4%. As family lawyers, we are expecting a rush of divorce enquiries and finalised settlements as more separating couples will be able to afford to split their household.
With the uncertainty caused by long-term financial instability and high rates, mortgages have been out of reach for thousands of people trying to get on the housing ladder. However, separating couples have been hit hard, and many have struggled to proceed with their divorce without knowing whether they would be able to afford a house on their own. This has raised concerns about individuals being forced to remain in unhappy, and potentially abusive relationships far longer than they should.
As the BoE drops its base rate, mortgage rates will likely fall in line, and borrowing capacity will improve. Remortgaging will also be easier, relieving some of the pressure on couples who may need the extra cash at a time where money is tight.
I have several clients who have been awaiting the change in the base rate with anticipation and hope. These people have been putting off finalising their financial settlement until there is more security in their borrowing capacity, or in some instances, people simply would not have been able to afford a mortgage to secure a suitable home, which they can now do. This uncertainty has dragged out their proceedings, causing emotional strain. Some remain in the family home with their ex, obviously a less-than-ideal situation for couples who are ready to go their separate ways, often subjecting children to conflict.
In many cases, borrowing capacity determines how a matrimonial pot is divided, to ensure that housing needs of the parties and their children are met. The base rate reducing will therefore have a direct impact on a number of cases currently in negotiations. The new base rate will hopefully cause a sigh of relief for many couples ready to commence divorce proceedings, or those looking to borrow for a new, sole mortgage.”
