Bank of England raises interest rates to 3.5 per cent

The Bank of England has raised interest rates from 3 to 3.5 per cent, the ninth consecutive increase. Six members of the nine-strong Monetary Policy Committee favoured a 50 basis-point rise, with two voting to maintain base rate at 3 per cent and one preferring a 75 basis-point increase to 3.75 per cent.

Although borrowers will feel that rate rises are coming thick and fast, hopefully this will succeed in getting double-digit inflation under control quicker. While inflation fell from 11.1 per cent in October to 10.7 per cent in November, it is still some way off the Bank’s 2 per cent target, so this latest rate rise comes as no surprise. However, inflation is expected to continue to fall gradually over the first quarter of next year, with many forecasters predicting that base rate will subsequently peak at a lower level than it might otherwise have done.

That said, borrowers will need to come to terms with the new norm, which is higher interest rates, as the rock-bottom rates of the past are long gone. The sub-1 per cent two and five-year fixes which were so commonplace last autumn feel like a lifetime ago now.

government assistance

As rates continue to rise, along with the cost of living, the negative impact on the housing market is inevitable. Indeed, Halifax’s November house price index revealed that average prices fell by 2.3 per cent in November, compared with a 0.4 per cent drop in October and the third consecutive monthly fall. Halifax reported that some potential home moves have been paused as homebuyers find their affordability stretched but that prices are still £12,000 higher than this time last year and remain well above pre-pandemic levels.

Given the importance of the housing market to the wider economy, the government needs to provide some form of assistance to stimulate the market and turn up the economy once higher interest rates have succeeded in bringing down inflation. This could take the form of a restructure of stamp duty to encourage downsizers to sell and move to a smaller property, freeing up larger family homes for those trying to move up the ladder. Or introducing some form of mortgage interest tax relief to alleviate some of the many stresses borrowers will face in coming months.

how MT Finance can help

MT Finance are here to help. Our bridging loans are available for up to two years, with interest retained for the full period if preferred, which means no monthly payments for 24 months. This can help landlords and investors with budgeting in a rising interest rate environment, giving them maximum flexibility to see through the current uncertain environment before moving onto a longer-term product once the market has settled down.

Our lack of early repayment charges means there are no financial penalties if circumstances change and you need to exit early. To get in touch with one of the team, contact us on 0203 051 2331, online or via

quick enquiry