The Bank of England has raised the base rate for the first time in three years – up from 3.75% to 4%.
In a vote of 8 to 1, the Monetary Policy Committee of the Bank of England decided today to take decisive action over inflation fears.
Ironically, the rise came as the main driver of inflation – energy prices hiked by the ongoing war in the Gulf – took a twist for the better as the price of oil fell 13% on the markets.
Rachel Geddes, Strategic Lender Relationship Director, Mortgage Advice Bureau said: “The Bank of England raising the base rate to 4.00% was widely expected, especially with inflation at 3.5% in September. Anyone on a tracker or standard variable rate is likely to see their payments impacted first. If you’re on a fixed rate, nothing changes until your deal ends, but today’s rise could still shape the deals you’re offered next.
“A base rate rise doesn’t close the door on buying, but it can change what you’re able to borrow. Lenders set their fixed rates based on where they expect interest rates to go, so some of today’s rise may already be reflected in the deals you’re seeing. If you already have a mortgage offer, it’s worth finding out where you stand rather than waiting to see what happens.”
Simon Wright, UK Co-Chief Executive Officer for PEXA, said: “A rise in interest rates will be unwelcome news for many households, particularly those approaching remortgage or considering a move. Higher borrowing costs will inevitably place additional pressure on affordability and may lead some consumers to delay their plans for buying or remortgaging.
“While this could contribute to a slowdown in activity, it also gives the industry an opportunity to focus on the systems and processes that support property transactions. Reducing unnecessary friction and improving connectivity can help ensure property professionals are well equipped to support consumers when market activity picks up again.
“At a time when every financial decision carries greater weight, a more connected property ecosystem can give buyers, sellers and those remortgaging greater confidence to move forward, while enabling conveyancers, lenders and other property professionals to focus on providing the support and guidance their clients need.”
Jason Tebb, President of OnTheMarket, comments on the interest rate rise: “As expected, the Bank of England increased base rate to 4 per cent this month.
“With the rate of inflation rising to 3.5 per cent in the 12 months to September, it seemed almost inevitable that this would force the Bank of England to act. It is the end of the road for the ‘wait and see’ approach which has served the Bank well this year, helping create a steady environment at a time when there has been so much wider geopolitical upheaval.
“If inflation continues to rise, there may well be further rate increases to come, further impacting the affordability of those who might have been planning to move in the new year.
“Serious buyers and sellers continue to engage with each other but with the former having potentially less purchasing power after today’s announcement, the sensible pricing of property coming to market is essential.”
