And so, we enter the week in which President-Elect Trump will be inaugurated.  And as we do so, our politicians, economists and citizens will turn their attention to the USA to understand what impact this change will have on the domestic and global economy.

Not only will the White House be governed by a Republican leader after two Democratic terms but by a Republican with – arguably – much more opaque policies than those who came before him.

The American Federal Reserve has already made the first divergence from their (and the Bank of England’s) recent approach to interest rates. In December, rates were raised by 0.25%. The financial press has been quick to note that Mark Carney has also indicated that he foresees UK interest rates rising although in a ‘limited and gradual’ manner.

The UK has historically, and unofficially, linked its interest rates to the USA so this seems to suggest a move in 2017 although Mr Carney’s London School of Economics presentation suggested he himself is less than certain stating that rates could go up or down.

Should the rates rise, however, this immediately has potential repercussions for our buy-to-let market. Rates from popular lenders currently show 2-year fixed-term rates between 1.7 – 1.9% reverting to 4.5 – 4.7% but even a 0.25% increase may see this above 2%. Along with Philip Hammond’s recent changes in relation to tenant charges (we wrote about this here); pressure on yields increases.

However, Mr Trump’s inauguration adds extra uncertainty – and potentially upside – to this. His stated intention is to relax banking regulation. This will enable a loosening of controls on lending (most specifically to middle income earners) and, despite current signs to the contrary from the Conservative government, could see similar pressure coming to bear in the UK.

The longer-term repercussions of an American move like this could result in a similar economic crisis as experienced in 2007 but, in the immediate term, it could spell more capital for both first-time home buyers and buy-to-let investors at least in its domestic marketplace. And more capital means more competition with resultant pressure on interest rates to stay low.

But for the moment, like the rest of the world, we’ll need to wait and see.

What do you think will happen post-inauguration? Will the Bank of England continue its interest rate mirroring trajectory with the Federal Reserve? Are you locking your buy-to-let properties into fixed rates early?

Limit your uncertainty. Book your FREE consultation with a specialist now.