BoE raises interest rates for 14th consecutive time to 5.25%

The Bank of England’s policymakers have today voted to raise the interest rate by 0.25%, setting a new 15-year high.
The interest rate now stands at 5.25% after a 14th consecutive increase saw it reach its highest rate since April 2008.
The BoE has warned businesses and households that the cost of borrowing will continue to be high for the next two years at the very least as it continues to battle to bring inflation down, but ruled out the possibility of a recession during that time.
 
Adam Oldfield, chief revenue officer at Phoebus Software, said: “Today’s decision by the MPC will come as no surprise, but it will no doubt cause consternation for many borrowers. Whether it was the right decision is questionable, especially when we saw the first dip in inflation last month. Perhaps it would have been wiser to give the last rise more time to take effect? It will certainly be interesting to see the results of the upcoming review of the bank’s forecasting and procedures and how that may influence the members going forward.”
“Although there has been a spate of mortgage rate cuts recently, the general consensus will be that a base rate hike will surely mean an increase in mortgage interest rates.  Hopefully, the speculation of an increase will have been enough for people to take stock and look at their mortgage affordability and current spending to prepare for a potential increase in mortgage payments. This provides opportunities for both brokers and lenders to look at their books and identify the most exposed borrowers. The last thing that lenders need is a big increase in mortgage defaults and repossessions.”
 
Adrian Anderson, director of property finance specialists, Anderson Harris, said: “The base rate increase today by the Bank of England to 5.25% was expected. There appears to be hope on the horizon for mortgage borrowers as inflation, whilst still high, is slowing in pace and thus there is less pressure to continue to increase the base rate at the pace we have seen.”
“Many lenders have in fact already priced this interest rate increase into current fixed rate mortgage pricing which is already incredibly high hence I am not expecting banks to increase fixed rates further in line with today’s base rate announcement.”
“I remain concerned however about the ongoing affordability for many households with mortgages who are already struggling with the cost-of-living crisis. Today’s rate rise will certainly heap more misery on the circa 2.2 million borrowers who are paying a variable rate mortgage.”
“The property market is incredibly fragile because borrowers are not prepared to saddle themselves with expensive mortgage debt. We therefore need to see some downward pressure on fixed-rate pricing to instill some confidence into the property market.”
 
William Scoular, head of private client lending at Investec Real Estate, said: “The Bank of England’s decision to hike rates by only 25 basis points indicates that the interest rate rise juggernaut could finally be running out of steam. There is growing evidence the inflation balloon is starting to deflate, as the bitter monetary pill UK consumers have had to swallow starts to take effect. The quicker this translates into an uptick in real estate transactions and new development starts, the better.”
“Despite the carnage of the past 18 months, most commercial borrowers have been able to manage their increased interest payments and whilst not thriving, they are surviving. For the sake of the UK economy, the hope is that this is where rates peak.”
 
Simon Webb, managing director of capital markets and finance at LiveMore, said: “With both the US Federal Reserve and European Central Bank raising their respective base rates by 0.25% last week, the Bank of England has followed suit.”
“With inflation starting to fall materially in the US and to a lesser extent the UK, hopefully the Bank of England can now pause its rate increases. Financial pressures continue to increase for many and there are 1.6 million fixed-rate mortgages due for refinancing in the next 12 months, not to mention the impact that 14 consecutive base rate raises is having on those borrowers with variable-rate mortgages. It’s also businesses that are being impacted by high borrowing costs with the number of insolvencies rising.”
“Of note was that two members of the MPC voted to raise the rate by 0.5%, with one voting no rise. Are we beginning to see a diversion of opinion across the members? What we do know is that the performance of the economy, inflation figures and other economic metrics will be key in deciding the next rate move.”
 
CEO of RIFT Tax Refunds, Bradley Post, commented: “The Bank of England’s ‘aggressive’ approach to managing inflation via interest rates has, to date, been pretty abysmal. It’s fair to say that they haven’t acted swiftly enough, or with the required level of intent to actually curb inflation, which remains extremely high.”
“At the same time, fourteen consecutive base rate hikes have had a serious impact on the average household, who are now not only dealing with a sustained increase in the cost of living, but are also paying the price when borrowing to make ends meet.”
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