Bank of England raises interest rates to 3 per cent

The Bank of England has raised interest rates from 2.25 to 3 per cent, the eighth consecutive increase, and the biggest jump in three decades. Seven members of the Monetary Policy Committee favoured a 75 basis points rise, with one voting for a 50 basis points increase and the remaining member voting for an uptick of 25 basis points. Rising inflation, coupled with the disastrous mini-Budget, mean this rate rise was always on the cards.

As rates rise and the cost of living increases, the impact on the housing market is surely inevitable. Indeed, Nationwide’s October house price index revealed that a slowdown is already evident, with average prices falling 0.9 per cent month-on-month, the first monthly decline in 15 months, as the post-pandemic frenzy has dissipated. What’s more, Chris Rhodes, chief finance officer of the building society, told MPs that a ‘worst case’ scenario was that house prices may fall by 30 per cent in the next 12 months, although the lender’s central scenario was a fall of 8 to 10 per cent. While activity in the housing market is slowing as buyers get to grips with higher mortgage rates and squeezed affordability, this needs to be put into perspective – even if prices did fall by 10 per cent, we would be back where we were a year ago.

Government assistance

Given the importance of the housing market to the wider economy, the government needs to provide some form of assistance to stimulate the market. 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. Such a reduction in stamp duty would also help those forced buyers in coming months who are struggling to afford the mortgage they stretched themselves to take on when rates were low and are now facing rising costs, or impending higher rates when they come to remortgage.

Another option would be to target those struggling with higher costs with some form of mortgage interest tax relief to alleviate some of the many stresses those borrowers will face in coming months. With this rate rise unlikely to be the last, given that the headline rate of inflation is 10.1 per cent – well above the Bank of England’s 2 per cent target, – the situation is likely to change again, although it looks as though rates will not need to rise as high as they might have done had many of the mini-Budget proposals not been reversed. Planning ahead and seeking advice from a broker will help minimise the financial pain.

how MT Finance can help

At MT Finance we 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 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 online, on 0203 051 2331 or via

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