Bank of England raises interest rates to 0.75%
The Bank of England’s Monetary Policy Committee has voted by a majority of 8-1 to raise interest rates by a quarter point to 0.75 per cent. This is the third base rate rise in three months and is unlikely to be the last, with another move possible at the next meeting on 5 May.
This rate rise was fully anticipated by the markets due to the need to manage soaring inflation, which is currently well above the Bank’s 2 per cent target. In the minutes accompanying the latest decision, the Bank said that the Consumer Prices Index is now set to reach around 8 per cent in the second quarter. It warned that if wholesale energy prices continue to rise, inflation could increase even further by the end of the year, finishing ‘several percentage points higher’ than the 7.25 per cent peak forecast last month.
The latest increase in rates is likely to help cap some excess spending by consumers, although in a record low mortgage rate environment, consumers are finding that they are still able to manage themselves and their costs.
Mortgage pricing is edging upwards, with several lenders raising rates in recent weeks. However, many lenders up until this point have not passed on previous rate rises in full due to a highly competitive market and plenty of liquidity; if they want to attract business, they need to absorb some of the rate increases. The question is, how long will they be prepared to do this for.
That said, borrowers need not panic as we remain in a low interest rate cycle, despite this latest rate rise. Planning ahead and seeking advice will help minimise any financial pain.
how MT Finance can help
With interest rates continuing to rise, buyers are looking to make their move as soon as possible in order to lock into affordable long-term mortgage deals. Many are prepared to stretch themselves to bid higher than they otherwise would have done in order to secure that dream home.
As demand continues to outstrip supply, house prices carry on rising, although in a more modest fashion. This is understandable considering the increases we have seen over the past 18 months – the highest price increases in more than 15 years, according to the Halifax. For those wanting to purchase an investment property in this highly competitive market who are not cash buyers, a first or second charge bridging loan can increase your desirability as far as vendors are concerned.