The Bank of England base rate rise – industry reacts

Reaction from the worlds of property and finance was swift after the Bank of England announced that its base rate would increase to 3%.

That means lending for landlords looking for a new mortgage deal just got more expensive.

Angus Stewart, the chief executive of Property Master, an online broker for BTL mortgages, said: “Landlords should check when their current fixed terms are expiring or see whether they wish to have certainty on their monthly repayments by looking at a new fixed rate now as base rate increases yet again.

“Landlords should also expect any mortgage on a tracker or variable rate to reflect this rate increase and while many fixed rates are already pricing in this level of interest rate, we are seeing continued fluctuations in lenders’ rates.

“The good news is that there is now greater stability in the financial markets and products are not being withdrawn and repriced as they were immediately after September’s disastrous mini-Budget.”

He said that base rates are expected to continue increasing over the next year to between 4% and 5% which means this might be a good time for landlords to look at their current mortgage rate and see if they can lock in some certainty of monthly repayment.

‘Bank of England threw a black cloud over the UK economy’

Sarah Coles, a senior personal finance analyst at Hargreaves Lansdown, said: “The Bank of England threw a black cloud over the UK economy today, shrouding it in gloom.

“It warned that we’re set for a miserable recession throughout next year and the first half of 2024.

“GDP is expected to fall about 0.75% during the second half of 2022, as higher energy prices put the squeeze on our disposable income. It’s then expected to keep falling through 2023, and the first half of 2024. “

She added: “Meanwhile, wages will fall 0.25% behind rising prices this year and 1.5% behind in 2023, and the unemployment rate is forecast to hit 5.9% at the end of 2024 and 6.4% by the end of 2025 – up from 3.5% in the three months to August.

“For now, rates are on the rise, with the biggest jump in more than three decades, but this is likely to have less impact on savings and mortgages than you might expect. Fixed rates, in particular, may well be held back by the fact that the Bank doesn’t see higher rates enduring.”

‘This rate rise was always on the cards’

Tomer Aboody, the director of property lender MT Finance, said: “Rising inflation, coupled with the disastrous mini-Budget, mean this rate rise was always on the cards.

“Borrowers need to come to terms with the new norm, which is higher interest rates – the rock-bottom rates of the past are long gone.

“As rates rise and the cost-of-living increases, the negative impact on the housing market is inevitable.”

He added: “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 or some form of mortgage interest tax relief to alleviate some of the many stresses that borrowers will face in coming months.”

‘Could have been worse’

Mark Harris, the chief executive of mortgage broker SPF Private Clients, said: “The market expected a 75 basis points increase, which could have been worse had the Liz Truss government prevailed.

“Swaps have eased by more than 100 basis points since the mini-Budget, so while 3% may not be the peak for base rate, we don’t believe it needs to, or can go, much higher.

“With the money markets already pricing in their expectations, we are not expecting new fixed-rate mortgages to rise by an equivalent amount.”

He added: “Given how the markets reacted to recent political interventions, gilt yields and swaps have fallen so fixed-rate mortgages could actually fall in coming days and weeks.

“Lender appetite and competitiveness may also increase as activity falls, adding further impetus to recent rate reductions.

“Those on trackers will see their mortgage payments rise by the full amount – someone with a £200,000 base rate tracker mortgage currently paying 3.25% will see their monthly payments rise from £975 to £1,056.”

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