Bank of England raises interest rates to 4 per cent

The Bank of England raised interest rates from 3.5 to 4 per cent at its February meeting, the tenth consecutive increase. Seven members of the nine-strong Monetary Policy Committee voted for a 50 basis-point rise, with two voting to maintain base rate at 3.5 per cent.

While yet another rate rise will be unwelcome to borrowers, they will be hoping this will be one of the last to come in quick succession. There is reason to be optimistic on this front, with updated projections from the Bank showing inflation falling back sharply from its current level of 10.5 per cent in December to around 4 per cent towards the end of this year.

As well as inflation peaking, the Bank expects interest rates to do so soon as well, with base rate topping out at around 4.5 per cent in the middle of this year. Indeed, it is not unreasonable to question whether there could be an even bigger stimulus for the property market in the form of a possible rate reduction from next year. The Bank’s forecast talks of rates falling back 3.25 per cent in three years’ time as inflation reduces to its 2 per cent target in the medium term. While the Bank does caution that there are ‘considerable uncertainties around this medium-term outlook’, it’s the most positive news about the economy that we have had in a while.

Despite another base rate rise which will hit borrowers on variable-rate mortgages, fixed-rate pricing continues to fall. At the time of writing, HSBC had just reduced its five-year fix for those remortgaging at 60 per cent loan-to-value to 3.99 per cent, so the psychologically significant 4 per cent barrier has been breached. While we are unlikely to see a return to the sub-1 per cent two- and five-year fixes which were available in the autumn, it feels as though the market is settling down to a ‘new norm’. This will be far more palatable, as far as borrowers are concerned, than the six per cent fixes launched after September’s ill-fated mini-Budget.


housing market continues to rebalance gently

With a clear target set out by Prime Minister Rishi Sunak in terms of halving inflation by the end of this year, there are signs of a little more confidence within the financial and housing markets. This has brought some stability to the latter with property prices relatively unchanged in January, according to Halifax. The lender reported that there was no change in average property prices in January, after falls in November and December, while annual growth slowed to 1.9 per cent, slightly down from December’s figure of 2 per cent.

Buyers seem to be feeling more hopeful although expectations are having to be managed due to tighter affordability. A possible mantra for buyers for the year ahead is to be as sensible as possible and beware of overstretching. Homes will be there to be bought, particularly as we head into the traditionally busier spring market, but at a level which should suit the individual buyer’s affordability.


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, so there are no monthly payments for 24 months. This can be useful for landlords and investors to assist with budgeting, giving them maximum flexibility before moving onto a longer-term product once the market has settled.

We do not impose early repayment charges so if circumstances change and borrowers need to exit early, there are no financial penalties. To contact one of the team, call 0203 051 2331, online or via

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