"Today's decision by the Bank of England to increase interest rates by 0.25% to 4.5% - marking the 12th consecutive hike and the highest level since the 2008 crisis - will be putting a chokehold on people's personal finances"
Despite inflation easing for the second month in a row, BoE's Monetary Policy Committee voted 7-2 in favour to raise the Bank Rate by 0.5% to 4% - a move which was widely anticipated by lenders who had already begun to increase borrowing costs earlier this week.
Following 14 years of low mortgage rates and in the midst of a cost-of-living crisis, today’s announcement will feel like more bad news for many existing homeowners.
As you would expect, the property industry was quick to react. Here's what they're saying.
Nathan Emerson, Chief Executive for Propertymark, said:
“For those on fixed-rate mortgages, this latest increase is likely to have no immediate effect, and for those looking for a new fixed rate, they should also see little change in the market offering due to it being already factored into banks’ pricing.
“However, for those on tracker mortgages, like many landlords in the buy-to-let market, this means another rise in outgoings. In the rental sector, a rise in the cost of supplying a home will put further pressure on rents and may see some investors forced to exit the market altogether, further worsening the extreme supply and demand imbalance seen already.
“It is imperative that the UK Government urgently do more to support homebuyers and landlords with their rising costs, especially as interest rates look to remain high into the start of next year.”
Simon Gammon, managing partner at Knight Frank Finance, said:
"We're not expecting any substantial moves in mortgage rates as a result of today's decision. Several large lenders have notched rates up in the past fortnight, but that's largely to control business levels. Borrowers are extremely sensitive to interest rates at the moment so the cheapest on the high street tends to get swamped.
"Mortgage rates are going to come down eventually, but probably not for the rest of this year - at least not by much. The biggest conundrum for most borrowers at the moment is whether to fix for two years or take a tracker.
"Both are priced around 0.2% - 0.3% over the base rate, so borrowers refinancing now have to take a view on whether they think interest rates will fall within the next two years, in which case a tracker might be suitable. Of course that comes with the risk that your monthly payments will rise if the Bank of England opts to raise interest rates further, so it's a highly personal decision."
Tom Bill, head of UK residential research at Knight Frank, said:
“The latest rate rise won’t have a huge impact on the housing market but sentiment will be dented if the peak starts to feel further away. For now, after the mini-Budget threw a bucket of cold water over the property market, activity has become lukewarm.
"House price growth is largely flat, sales volumes hit their low point in January and the economic backdrop is gradually improving. We expect prices may fall by a few per cent this year as higher mortgage rates erode demand but activity will be supported by a strong jobs market, record levels of housing equity and lockdown savings.
"As the general election moves onto the radar over the next 12 months, it may be that political uncertainty curbs demand even as the bank rate and inflation move past their peak.”
Paul Broadhead, Head of Mortgage & Housing Policy at the BSA said:
“As inflation rates remain above 10% a further Bank Rate increase was always a real possibility. It is, however, widely expected that we are now at, or very close to the peak.
“Following the 11 Bank Rate increases in the last 18 months, the interest paid to savers has been rising. Whilst the last decade has been a difficult time for savers, particularly those who rely on their savings for income, shopping around can now make a sizeable difference to the returns available. There is a wide range of savings accounts available, which vary depending on the provider, term and access required, with attractive rates available for all levels of savers.
“For mortgage borrowers, this latest increase is less positive, particularly for those who will be coming to the end of a fixed-rate term this year. Most will see a significant increase in their mortgage costs, which will be on average around £176 extra a month for those with a two-year deal.
"Whilst our figures show that around nine in ten homeowners are not currently concerned about their ability to make their monthly mortgage payments, only time will tell whether they have factored future increases into their household budgets.
“Lenders continue to remain alert to borrowers who are worried about making their mortgage payments and are ready to offer tailored support to anyone who may be struggling.”
Rob Clifford, Chief Executive of mortgage and protection network, Stonebridge, comments:
“As with recent increases to Bank Base Rate, there was more than a hint of inevitability about this decision given how high inflation remains and other wider factors including the US Federal Reserve’s decision to increase interest rates there earlier this month. That said, while the Fed hinted this could be its last increase for some time, there will be many who feel our MPC are not able to signal we are at the end of our own interest rate increase journey yet. The pressure continues to build on the Bank while inflation remains high, and its 2% target looks a long way away, which means we cannot rule out further increases in the months ahead.
“That being the case, there remains something of a disconnect between BBR and mortgage product pricing, although swap rates have also been rising in recent days. It’s a tricky mortgage market for existing and would-be borrowers to unpick, and the need for professional mortgage advice in this environment seems greater than ever.
"Movements in rates always hit the headlines, and can be of concern for borrowers, so advisers need to be using today’s announcement to make contact with their customer base and to outline the options that are available to them, particularly for those who are going to end up paying more as a result of today’s decision.”
Steve Seal, CEO, Bluestone Mortgages, comments:
“Today's decision by the Bank of England to increase interest rates by 0.25% to 4.5% - marking the 12th consecutive hike and the highest level since the 2008 crisis - will be putting a chokehold on people's personal finances.
"Consecutive rate hikes and persistent inflationary pressures over the past year have already pushed mortgage repayments higher and added to the affordability challenges faced by those looking to get a foot on the property ladder.
“Individuals who are struggling to keep up with their mortgage payments or aiming to take their first steps onto the property ladder should know that assistance is readily accessible. It is critical to contact their lender as soon as possible or seek advice from a mortgage broker to consider their options. As an industry, it is our responsibility to direct customers to the necessary assistance to make their dream of homeownership a reality.”
Emma Hollingworth, Managing Director of Mortgages at MPowered Mortgages comments:
“It is no surprise that the Bank of England has taken today’s decision to raise the base rate to 4.5%, the highest it has been since 2008. The ramifications will be felt throughout the mortgage market, and as such, there has never been a more critical time for buyers to seek professional advice.
“However, despite the rising interest rates, there remains healthy demand in the market, demonstrated by the 18% rise in loan approvals for house purchases between February and March and remortgage activity will be supported by the 1.4 million people with fixed-rate mortgages set to expire in 2023. Additionally, with inflation predicted to start coming down in the second half of the year, we are confident that the market will be able to weather the challenges presented by today’s interest rate rise.
“That being said, lenders and brokers must continue to work to understand the needs of their customers in a complex market and to provide them with mortgage decisions as quickly and efficiently as possible. At MPowered Mortgages, our AI and data-driven process can rapidly process complex applications and support brokers in helping homebuyers to achieve their homeowning ambitions.”
Rightmove’s mortgage expert Matt Smith, says:
“Over the last couple of weeks, average fixed-rate mortgages have been slowly edging up in anticipation of today’s rise of 0.25% in the Bank of England Base Rate.
"There is unlikely to be any immediate changes in lender rates based on today’s decision, and lenders are instead likely to wait to see what the impact of the Bank’s comments on the outlook of the economy have on swap rates. An average five-year fixed 85% Loan-To-Value mortgage rate is now 4.52%, up from 4.44% last week.
"To put this into context, this amounts to a difference of £14 a month for someone purchasing an average property and spreading the cost over 25 years. So, while we may continue to see fixed deals fluctuate slightly up or down in the short term, buyers coming to market soon may find that the amount they need to repay each month doesn’t change significantly.
“Those on a tracker mortgage will be more disappointed with today’s news, as they may have thought that the Base Rate had peaked in March given some of the positive signs for the wider economy, and this is another cost they will need to factor into their monthly budget when the full rate rise is passed on.
“Buyer demand is now higher than pre-pandemic levels, most notably in the typical first-time buyer sector, so it is likely we will see lenders try to remain competitive to meet this demand. We’re also starting to see creative ways some lenders are trying to help segments of the market get onto the ladder with the launch of Skipton Building Society’s 100% mortgage product.
"While it is clearly designed to target a very specific segment of the first-time buyer market, given the affordability challenges many first-time buyers to face, short-term innovations such as this are welcome to try and help more would-be first-time buyers own a home."
