REACTION: BoE Interest Rate Rises 0.5%, But Will It Drive Up Mortgage Costs?

The Bank of England has raised interest rates by 0.5%, taking the base rate to 3.5% and heralding a rise in many landlords’ buy-to-let mortgage repayments.

Following the latest meeting of its Monetary Policy Committee lead by Governor Andrew Bailey (pictured), members voted for the ninth consecutive rise since December 2021, putting the rate at its highest level for 14 years.

Landlords and homeowners now face the likelihood of more expensive monthly repayments; about 1.6 million people on tracker and variable rate deals will see an immediate increase in their monthly payments. Those on a typical tracker mortgage will pay about £49 more a month while those on standard variable rate mortgages face a £31 increase.

Those three-quarters of mortgage customers on a fixed-rate mortgage – including canny landlords who’ve been releasing maximum equity from their portfolios when rates were low before fixing – won’t see monthly payments changing immediately, but house buyers or anyone wanting to re-mortgage will have to pay a lot more now than if they had taken out the same mortgage a year ago.

The committee warns that more rate rises are on the cards to further bring down inflation, with analysts suggesting that they could reach 4.5% by the summer.

Financial expert: Adrian Anderson, Anderson Harris “Although there is certainly no Christmas cheer from the Bank of England this year for borrowers, the fact that the size of the hike is down 0.25% on the previous increase, coupled with lower inflation figures released yesterday, means that we may be seeing the start of the end of the rate hike cycle with the market now pricing a terminal rate (top rate) for base at 4.5%, down from previous Armageddon predictions of 6-6.5% post mini-budget.”

The portal: Tim Bannister, Rightmove “It’s important to remember that this rise was largely expected by the markets and so will already have been factored into many mortgage lenders’ fixed rates.

“So the good news is we don’t expect this rise in the base rate to translate directly into increases in current fixed mortgage interest rates.”

The conveyancer: Simon McCulloch, Smoove “The Bank of England is walking on a very fine tightrope while trying to curb inflation. Today’s interest rate increase will put even more constraints on the financial situations of both buyers and sellers in the property market, especially those on tracker mortgages or coming to the end of their fixed-rate term soon.”

The agent: Lawrence Bowles, Savills “On the assumption that interest rates peak then gradually ease back a predicted peak of 4% from the middle of 2024, Savills is forecasting that values will begin to recover and that the average UK house price will rise by a net figure of +6% in nominal terms over the next five years.

“This means that by the end of the forecast period (2027), the average UK house price is expected to be at £381,578, a £22,290 gain over five years. This will put prices a significant £92,000 above the pre-pandemic level, following two and a half years of considerable growth (+24% to the end of September).”

Subscribe here for the latest landlord news and receive tips from industry experts:

Property News Room News

Bringing you property related news from around the world.