The Bank of England has confirmed that interest rates will increase to 0.5%.
Today’s rate increase is the second in three months, following a rise from 0.1% to 0.25% in December, in an attempt to curb a rapid rise in the cost of living.
Experts from within the property industry have issued reactions to today’s interest rate increase.
Richard Pike, Phoebus Software sales and marketing director, says:
“The interest rate rise by the Bank of England today is no surprise to anyone given the way that inflation is spiralling upwards. However, the fact that the vote was so tight and those in the minority wanted to increase to 0.75% is telling for the next meeting. If the Bank starts to raise rates in increments of 0.5% it will not take long for the increase to have a marked effect on mortgage interest rates.”
Richard Hayes, CEO and co-founder of online mortgage broker, Mojo Mortgages, said:
“Given the rise in inflation we’ve seen over recent months, it is no surprise to see the Bank of England increase interest rates to 0.5% today.
This will undoubtedly have an impact on homeowners, particularly for those with mortgages on standard variable rates, although for many the costs will not be felt until further down the line. The majority of mortgage borrowers are on fixed-rate deals so they will only see changes when their current term ends.
However, for those due to remortgage soon, it would be worth speaking to a broker as soon as possible to secure a new rate before the market feels the effect of the rise.”
Nick Chadbourne, CEO of LMS said:
“For most borrowers, the effects of today’s base rate rise by the Bank of England will be minimal. Approximately 98% of people take out a fixed rate mortgage, and these borrowers will not see an impact until they come to remortgage at the end of their Early Redemption Charge period (ERC).
However, the 2% of borrowers on a tracker rate mortgage, or those coming to the end of their fixed-term, may struggle with the increased payments as a result of this rise. Especially at a time when finances are already squeezed due to the ongoing energy crisis causing household bills to increase and lasting effects of the pandemic.
Collaboration across the industry will be vital to support borrowers through the challenges of the current market, ensuring brokers, conveyancers and lenders have access to the right tools to progress cases efficiently and secure the right deal for each case.”
Tim Bannister, Rightmove’s Director of Property Data commented:
“The level of demand we’re seeing from home buyers at the start of the year suggests the rise in interest rates is unlikely to dampen the motivation to move. We’ve seen a real desire from both sellers and buyers to take action and move at the start of this year, and this is likely to outweigh the impact of an interest rate rise on house prices, at least in the short term.
While the majority of Britain is on a fixed rate mortgage, for those on a tracker mortgage pegged to the Bank of England base rate, the rise to 0.5% could mean in the region of £40 extra* each month for the average home. An interest rate rise so soon after the last may prompt some in this group to look at fixed rate deals now if they can, or when their current deal ends, in case rates rise further in the near future.”
Director of Benham and Reeves, Marc von Grundherr, commented:
“Another marginal increase in interest rates is unlikely to dampen the house price party that UK homebuyers have been enjoying since the beginning of the pandemic and while the general expectation is that they may hit one per cent, this won’t materialise until the end of the year at the very earliest.
We expect a strong level of foreign demand to return to the market in 2022 and this will also help boost the market considerably regardless of what happens with interest rates.
Many foreign buyers, particularly across Asia, tend to finance their investments with banks closer to home, in Hong Kong or Malaysia for example. So UK interest rates won’t have a huge influence on them as most are already paying around three to four per cent and are happy to do so.”
