Today’s decision will likely add further financial pressure to households across the UK who are already having to contend with spiralling fuel bills amid the cost of living crisis.
As you would expect, the property industry was quick to react to the news. Here's what they're saying:
Rightmove’s property expert Tim Bannister says: “Today’s 0.5% rise in the Bank of England base rate is another cost that homeowners on a tracker mortgage will need to factor into their monthly budgets when the full rate rise is passed on.
"It’s likely that many of those on a tracker mortgage will still be on a lower rate than most current fixed deals even with this increase, so we’re unlikely to see any rush to fix from this group just yet, although with the gap between tracker and fixed rates narrowing it may prompt more people to see what’s on offer in the coming weeks.
“For those considering taking out a fixed mortgage deal soon, the good news is that this increase was widely expected by the financial markets and will have likely been factored into their plans. This means that we may see fixed-rate mortgage deals continue to edge downwards in the first half of this year, as some stability and calm continue to return to the markets.
“We’re still seeing buyer demand higher than the last normal housing market of 2019, indicating that people have the confidence to get on with their moves and if fixed deals do head further downwards this may encourage people further. We may see further increases in the base rate later this year but it’s difficult to predict how it will impact mortgage rates.”
Tom Bill, head of UK residential research at Knight Frank, said: “The size and direction of the bank rate movement is now less relevant for house buyers than the fact there is stability in the mortgage market. Fixed rates are edging down steadily but not significantly following the mini-Budget as the peak for borrowing costs gets nearer.
"Buyers and sellers switched off long before Christmas last year due to the volatility caused by the mini-Budget, but activity has recovered in 2023. Most buyers are needs-driven and have accepted the new normal for mortgage rates, which is supporting demand. The less negative message from the Bank of England on the prospects for the UK economy will help sentiment.
"The resilience of prices and sales volumes will be put to the test in the spring when larger numbers of transactions take place and by which time virtually no five-year fixed-rate mortgages below 4% will remain in the system. We expect prices to decline by 10% over the next two years as budgets get recalculated.
"A strong labour market, relatively low supply, and the fact more homes have been owned outright than with a mortgage in England since 2013 will keep upward pressure on prices.”
Paul Wilson, Chief Investment Officer at Channel Capital, said: “A decade of record-low interest rates was not economically healthy or sustainable. But moving from all-time lows to a 15-year high of 4% in the space of 14 months has inevitably created challenges for lenders and borrowers alike.
“For lenders, it has hindered their efforts to secure senior debt from banks and institutions, many of which are reticent to deploy capital in the current climate of changing rates. The shortage in senior debt – which is essential, given it makes up the majority of a lender’s funding stack – is, in turn, preventing or limiting lenders from issuing loans to clients. It becomes a vicious circle.
“At times like these, other sources of capital become more important. Mezzanine finance is a prime example, and we’re seeing more lenders look to this option when building their funding stack. By securing mezzanine finance from more nimble, ambitious, or proactive investors, lenders are then able to provide much-needed confidence to the senior debt providers. As such, more must be done to champion the role of mezzanine finance in the current climate; it is keeping the lending industry active and is likely to remain in high demand over the months and years to come.”
Steve Seal, CEO, Bluestone Mortgages, comments: “While there are signs that inflation has reached its peak, today’s decision will still be a tough pill for consumers and borrowers to swallow. Interest rates have now risen for the tenth consecutive month, pushing mortgage repayments higher yet again. As a result, affordability challenges will likely remain.
“For those who are struggling in the current situation, remember that hope is not lost and there’s help at hand. Not only is there a wide range of support available for customers struggling with their financial situation, but we’re likely to see rates come back down later this year. Now more than ever, specialist lenders have a vital role to play in supporting customers who do not fit the ‘vanilla’ category. It’s the duty of this industry and at the heart of what we do to ensure these customers can still reach their homeownership dreams.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman, says: "The effects of the Bank of England’s base rate decision have seemingly been discounted by many homebuyers and sellers who are on fixed-rate deals which don’t expire for some time yet. But don’t get me wrong, those directly impacted by the change will know all about it in their repayments.
"The impact on house prices has been a reminder that negotiations can be tough if transactions are to happen as prospects are not exactly rosy.
"While another base-rate rise is unwelcome, more attention is being focused on two- and five-year fixed-rate mortgages, which thankfully have started to fall. This will bring much-needed stability and confidence to take on debt, despite continuing worries about the economy."
Tomer Aboody, director of property lender MT Finance, says: "Borrowers will be hoping that this latest rate rise will be one of the last to come in quick succession.
"With Rishi Sunak’s government pushing to halve inflation by the end of the year, it is not unreasonable to question whether there could be an even bigger stimulus for the property market in the form of a possible reduction in interest rates from next year.
"One thing’s for sure, consumers are already preparing for more tough times ahead while they wait for some relief from aggressive rate rises."
Emma Hollingworth, Managing Director of Mortgages at MPowered Mortgages, comments: “While today’s decision by the Bank of England to raise interest rates by 0.5% will again increase the cost of borrowing across the UK, the mortgage market should remain resilient. This is especially the case given swap rates continue to make for positive reading.
“However, the cost of living is likely going to stay high for the foreseeable future. It is important the industry continues to support homebuyers and remortgagers by keeping rates as low as possible and by innovating products to suit consumer needs.
“Providing a smooth mortgage journey also continues to be important and at MPowered Mortgages, we are committed to using AI and data-driven innovation to make the mortgage journey as quick and simple as possible for all involved.”
