The Bank of England has today increased the base rate by 0.25% to 5.25%.
This marks not only the 14th consecutive hike by the central bank, but also sees the rate continue to reach its highest level in over 15 years.
The Monetary Policy Committee (MPC) voted 6-3 in favour of the 0.25% interest rate hike.
Two members preferred an increase to 5.5%, and one preferred to maintain the rate at 5%.
This hike followed the Bank’s decision to raise the base rate by 0.50% to 5% in June, demonstrating its aggressive stance in curbing soaring inflation, which peaked at a 40-year high of 11.1% in October last year.
Spurred on by fears of an incoming recession, the decision also aimed to combat current economic turmoil, exacerbated by the cost-of-living crisis, the Truss Government’s calamitous mini-Budget last year, as well as the ongoing conflict in Ukraine.
For UK homeowners, the decision threatens to raise mortgage costs even more, putting the mortgage market under further pressure.
Reaction:
Paresh Raja, CEO of Market Financial Solutions:
“That the base rate now resides above 5% is not in itself a significant issue; this was, of course, the norm before 2008.
“But the fact the jump up from a meagre 0.1% has come in a relatively short space of time (since December 2021) has offered borrowers, investors and businesses little time to adapt to higher rates.
“Positively, looking ahead, economists are suggesting the base rate may not rise as high or as quickly as once thought, and the rates available on products are starting to reflect that.
“Today’s hike shows that – perhaps counter-intuitively for borrowers, even though the base rate rose, there is some good news in that the jump was smaller than previously predicted, allowing lenders to reassess their rates accordingly.
“But right now, flexibility and communication from lenders remains of utmost importance, helping both existing and prospective clients to borrow responsibly without pulling products out from under them or being too rigid in the terms of loans.
“The market will realign to a higher base rate in due course, but today’s latest hike from the Bank of England reaffirms that lenders must double down on a proactive approach to supporting property owners and property buyers who will feel the effects of it.”
Jatin Ondhia, CEO of Shojin:
“It is more of the same for now, but there is a sense that we might be nearing the top of the interest rates mountain.
“Inflation is finally falling, with the next set of data on the 16 August expected to show another notable decline.
“In turn, pressure will ease on the Bank of England, meaning it can slow or pause on its hiking of the base rate. All of this would allow for much-needed stability and hopefully a bit of confidence to return.
“Still, we cannot underestimate the implications of elevated borrowing costs across the property market.
“Homeowners are facing higher mortgage rates than at any point since the financial crisis, while developers are also finding it harder to access finance.
“Consumers, investors and businesses will all be hoping that we are nearing the end of this economic turbulence – higher interest rates are here to stay, but we undoubtedly need to arrive at a point where the base rate is not continuously rising, giving everyone the chance to take more confident action where their money is concerned.”
Nicholas Mendes, mortgage technical manager at John Charcol:
“There were some forecasters that predicted the MPC will instead opt for a bigger 0.50% hike to 5.5%, but the downward inflationary figures a fortnight ago have certainly helped reduce the burden for those on a variable rate.
“There are an estimated two million homeowners on variable rate deals, such as Base Rate trackers or even their lender’s standard variable rate (SVR), who will see an almost immediate rise in their monthly repayments following the latest Base Rate rise.
“The most expensive variable rate is an SVR, this is the background rate that the lender charges interest at for those who have moved off a fixed rate or an initial term product.
“Lenders set the SVR themselves which often increases in line with the Bank of England Base Rate.
“The reason why it’s important to take action to ensure you avoid going onto the lender’s SVR is that the SVR can be set to whatever level they like.
“For example, to demonstrate the range between lender’s SVRs: Newcastle Building society’s SVR is only 5.94% whereas Virgin Money’s SVR is 8.74%.
“While SVRs often increase in line with the Bank of England they do not necessarily reduce in line with any reductions – meaning many homeowners could face a double whammy.”
Tobias Gruber, founder and CEO of My Community Finance:
“Although this hike in the base rate brings more misery for borrowers, it emerges as a silver lining for savers, providing banks swiftly pass on rates to their customers.
“Justifiably so, the FCA is piling on the pressure for high street banks to treat customers more fairly.
“It’s high time for banks to cease profiting from interest rate fluctuations while dragging their feet in extending these benefits to their customers.
“Savers should compare savings account options across various banks and financial institutions. Look for accounts that offer competitive interest rates and favourable terms to make the most of the current 15-year high-interest rates”.
Sarah Pennells, consumer finance specialist at Royal London:
“Given the recent news of lower inflation hard-pressed mortgage holders will be disappointed that the Bank of England didn’t leave the base rate untouched.
“With the speed at which interest rates had been rising, the higher repayment amounts, for some, will be unaffordable or a huge stretch on their finances.
“While those on a tracker rate have seen repeated mortgage rate rises since the end of 2021, the impact will be more keenly felt for those on fixed deals who are looking to remortgage.
“Rates were at historic lows on 2-year fixes in Summer 2021 and the majority of borrowers, whose deal is coming to an end in 2023 fixed at below two per cent, meaning they will be faced with considerably higher monthly mortgage payment amounts.
“Someone with a 25-year repayment mortgage with an average outstanding balance of £127,420 would be paying an extra £390 a month, based on the average two-year fixed rate mortgage today, compared to the average two years ago. That’s a massive £9,350 over the 2-year term.
“If anyone is worried about their mortgage or struggling, they should contact their mortgage lender or mortgage adviser as soon as possible. There’s a range of measures in place to help mortgage customers, and the earlier you ask for help, the sooner you may be able to access the support.”
“Royal London’s cost-of-living research conducted earlier this year found that 30% of UK consumers were already moving into their overdraft or needing to borrow funds before the end of the month to make ends meet, so further increases in mortgage costs will be a huge concern for many hard-pressed borrowers.
“Although savings rates have been getting higher, they have not kept pace with the rises in the Bank of England base rate.
“Given the Financial Conduct Authority’s 14-point action plan announced this week, savers will be hoping that they will see much improved rates to the savings products on offer.
“With the potential for rates to get more competitive, it’s vital that savers shop around to see what options are available to.
“Banks and building societies attract new customers with their best rates, so it could be worth moving your savings to another provider if it would earn more interest.”
Jonathan Samuels, CEO of Octane Capital:
“Whilst an unpopular opinion, it could be argued that the Bank of England hasn’t been daring enough in their decision to increase rates again today and really another 0.5% increase was needed in order to tame inflation.
“It’s far better to have a short period of pain brought about by higher interest rates, rather than a sustained period of significant economic turmoil and uncertainty.
“Take America, for example, where rates started to rise at a similar time to the UK, but in a far more aggressive manner.
“Inflation there is already back to 3% and so the target of 2% is within reach. If we had been as bold, then we too would be close to achieving the much heralded ‘soft landing’ and would be far closer to interest rates falling than we are now.”
Marc von Grundherr, director of Benham and Reeves:
“A 14th consecutive base rate hike will come as yet another nail in the coffin for the nation’s borrowers and will do little to boost a property market that has been treading water in recent months.
“We have seen some positive signs in recent weeks with mortgage approvals climbing. However, while this boost in market activity is good news, higher interest rates are likely to stifle the purchasing power of the nation’s buyers even more, resulting in the further stagnation of house prices.”
James Forrester, managing director of Barrows and Forrester:
“The nation’s borrowers will be forgiven for feeling like they are trapped in some sort of Bank of England Groundhog Day, with rates increasing for the 14th consecutive time today.
“The base rate is now the highest seen in over 15 years and so the latest generation of buyers will no doubt be panicked by the steep cost of borrowing they face in the current market.
“The silver lining is that a lower rate of increase suggests that we could be nearing the peak and while we expect to see lucky number 15 materialise, they could well plateau before the year is out.”
Chris Hodgkinson, managing director of House Buyer Bureau:
“Despite interest rates increasing consistently over such a sustained period of time, the property market is yet to topple.
“However, while it has remained largely impervious where property values are concerned, there is a growing undercurrent of instability forming beneath the surface.
“This is taking the form of less buyer activity, longer transaction times and, ultimately, a higher chance of transactions collapsing before they reach the finish line.
“So, while sales are still completing and for a fair price, sellers can expect a far more turbulent time making it through to completion.”
Bradley Post, CEO of RIFT Tax Refunds:
“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, 14 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.”
Andrew Gething, managing director of MorganAsh:
“Today’s decision to raise the base rate was certainly not unexpected. While we have seen inflation improve recently, the momentum is just not quite there yet to give the Bank of England confidence to pause. Pressures in the labour market and with services inflation will undoubtedly remain a key consideration for the MPC moving forward.
“For many borrowers, the hope will be that today’s news doesn’t have an impact on fixed-rate mortgages, which have been showing signs of improvement.
“This is especially true for the large number still set to remortgage in the near future.
“For those with standard variable or tracker rates, the news of a 14th rise to the base rate will be most unwelcome, pushing household budgets even further.
“With the expectation that this may not be the last rise either, lenders must have a close eye on this group of customers and any others facing difficulty, especially with Consumer Duty now in force.
“The arrival of Consumer Duty is an important reminder to the sector to ensure systems are in place to identify when customers are vulnerable and to protect those who are.
“Without a consistent approach to identify and monitor vulnerability, it’s impossible to ensure good outcomes for all customers – a clear requirement of the new Duty.”
Adam Oldfield, chief revenue officer at Phoebus Software:
“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 affect?
“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.”
William Scoular, head of private client lending at Investec Real Estate:
“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.”
Will Hale, CEO of Key:
“Today’s 14th consecutive increase takes the Bank of England base rate to 5.25% which is a figure that was last seen in February 2008.
“While inflation is starting to fall, prices are still increasing in real terms and this move will create an unwelcome additional expense for those mortgage borrowers who are stuck on variable rates or who are coming to the end of fixed term deals and looking to remortgage.
“For older borrowers trapped on a lender’s standard variable rate (SVR) this is a particularly worrying time.
“Ahead of this announcement the average SVR was 7.85% and there is no doubt that even with the Government Support Measures that some homeowners are going to be facing hard choices.
“For those in retirement that typically have fixed incomes and for whom the current cost of living pressures are especially acute, the options can be limited and often not palatable.
“However, the positive news is that the product landscape in later life lending is evolving rapidly and the sector continues to step-up to meet this growing societal need.
“Rates in the equity release arena start from 6.01%, fixed for life, so now may be the right time for customers to consider whether there may be a different way to manage mortgage debt in older age.
“There is no silver bullet. Whether it be a lifetime mortgage or a retirement interest product, all choices come with risks as well as benefits.
“However, with modern equity release products now offering customers the ability to service some or all of the interest as well as having the embedded protections of a no-negative equity guarantee and surety of tenure, the combination of flexibility and safeguards can make this an option that can deliver good outcomes for a wide range of different customers.
“Speaking to a specialist financial adviser will help homeowners better understand all their options and make decisions that are appropriate for their individual circumstances.”
Vikki Jefferies, proposition director at PRIMIS:
“The Bank of England’s decision to raise its base rate by 0.25% was to be expected given inflation stood at 7.9% in June, well above the target rate of 2%.
“It’s also likely that we will see further base rate rises to combat stubbornly high inflation, with many predicting that it could reach 5.8% by March 2024.
“Despite this, inflation has been easing gradually since October 2022 and is providing cause for optimism in the market.
“Yet the 14th consecutive base rate rise will undoubtedly compound the financial pressure that many borrowers are experiencing amid the still prohibitive cost of living crisis.
“Industry players need to continue considering ways to address this in their support for customers, particularly now that the new Consumer Duty regulations are in force.
“By working together proactively to secure the best outcomes for their customers, lenders and brokers will be better equipped to navigate this period and help ease any concerns borrowers may have.
“To help with this, advisers should capitalise on the support available to them.
“Networks offer invaluable access to crucial resources, products, technology and training which will enable them to secure the best solution for their clients’ mortgage and protection needs.”
Amanda Aumonier, head of mortgage operations at Better.co.uk:
“While the initial impact of the base rate hike might worry homeowners, especially for those with a tracker mortgage, it’s crucial to realise that the base rate is only one factor that impacts how lenders price fixed-rate mortgages.
“Increasing the base rate aims to manage inflation and we finally saw positive signs that this strategy was starting to work last month. What happens to inflation this month will have a significant impact on how lenders adjust fixed-rate mortgages in the coming weeks and months.
“Mortgage lenders employ various methods to finance homeowners’ loans, including Gilts and SWAP rates.
“These rates determine the interest mortgage providers commit to paying for their funding. In July, both Gilts and SWAP rates decreased as a result of falling inflation, indicating a more positive economic outlook that should reassure homeowners.
“Ultimately, it’s important not to allow the base rate to become a roadblock on your journey to a new home.
“Take advantage of online mortgage calculators to assess how changes in your personal circumstances may affect your affordability over time.
“First-time buyers should seek advice from mortgage brokers who can explore government-backed schemes and existing homeowners should speak with a mortgage expert about the options available when it’s time to remortgage.
“Careful planning with a qualified mortgage broker will help existing and aspiring homeowners navigate these challenging conditions.”
Matthew Howlett, research executive at Opinium:
“As rates rise for the 14th consecutive time to 5.25%, the pressure continues to build for mortgage holders who are on or about to come onto variable rates.
“Opinium research has shown that 6 in 10 UK mortgage holders are already worried about making their repayments.
“There are a lot of factors in play for homeowners, including house prices, inflation figures, and competition among mortgage providers – and as yet, the UK public doesn’t see the situation as requiring Government intervention.
“Over half (52%) of UK adults oppose a taxpayer-funded bailout for mortgage holders. In fact, people are more in favour of the government giving more support to renters (47%) than to mortgage holders (36%).
“However, as the situation develops these attitudes may start to change. One in 10 (9%) of those who are struggling or may struggle with their mortgage payments but are not worried about covering them think the Government will offer a bailout.
“A lack of Government intervention may start to grate as more people come off fixed-rate deals and a lack of available mortgages for first-time buyers depresses the housing market.”
Carl Parker, national director at Just Mortgages:
“Even with the positive news on inflation last month, the general expectation was that the Bank of England would continue its rate rising agenda.
“Last week’s news from across the pond of the Fed increasing its headline rate – despite the fact inflation was just 3% – further cemented this view.
“Thankfully the MPC mirrored the Fed’s call with only a 0.25% rise, rather than repeating its bumper rise in June.
“The hope is that because this was very much expected, it won’t spook the markets which is the last thing anybody needs.
“Even with the wider volatility, we are beginning to see some really positive signs.
“News of lenders improving rates – if only marginally for now, and a rise in transactions in June are both incredibly encouraging.
“It’s further proof to brokers that there’s still a market out there. In addition to those looking to remortgage, there are those that are driven to move and will do so regardless of the headlines in the national papers and the decisions of the Bank of England.
“With independent advice and access to the whole of market remaining critical in such a climate, brokers must remain proactive.
“Utilising all the tools at the disposal will be key to not only getting in front of clients, but in supporting more complex needs and cases.”
Katie Pender, MD of Target Group:
“Today’s rise puts more pressure on homeowners, despite tentative signs of respite last week when some lenders slightly reduced rates on some mortgages. We are still fighting the inflation fever and we aren’t out of the woods yet.
“In 2023, 1.6 million households will roll off fixed rate mortgages, and face higher monthly payments. Lloyds has already warned that an increasing number of customers are struggling to repay their debts, and with very little guidance from the FCA in terms of forbearance measures – most of which penalise the customer in the long term – today’s rise again highlights how a review of mortgage support is required.
“For starters, a proper forbearance strategy is required, as current measures do not adequately address the issue – they actually make things worse. Forbearance is meant for short-term solutions – not the 18-month battle against rising interest rates we currently face.
“A healthy housing market is key to economic strength, and while taming inflation should remain the Government’s priority, it’s also time to see what we can do better in terms of helping homeowners manage their debt, while also providing support to those most in need.”
Adam Ruddle, chief investment officer at LV=:
“The Bank of England’s decision to raise interest rates by a quarter percentage point is in line with our expectations.
“There was a strong possibility of a larger increase but given the improving position of forward-looking inflation indicators such as manufacturing costs, we believe the Bank will steadily increase interest rates over the coming months.
“This will balance the Bank’s role to retain price stability with the UK’s economic health. However, inflation remains more persistent in the UK, particularly inflation data excluding more volatile food and energy prices.
“Though more painful for the economy, I believe that further rises are necessary to curb inflation.
“Importantly however, on the back of improving data, we believe the peak has fallen from 6.5% to 5.75% which suggests that the end of this hiking cycle is in sight.”
Anna Clare Harper, CEO of sustainable investment adviser GreenResi:
‘‘This rise in interest rates means that two million households with mortgages on variable rates, or with their fixed rates coming to an end this year, face even higher monthly mortgage payments.
“The impact cannot be understated: the cost of housing will be closer to, or even above, net incomes for many householders.
“We can expect to see many of these property owners selling up for lower prices. Investors we work with are currently buying at 20 to 30 per cent below peak 2022 house prices, though it is worth noting that peak values reflected a mini-bubble from reduced stamp duty combined with very low interest rates through Covid.
“Despite price reductions, housing is no more affordable today, since higher interest rates also affect potential property purchasers.
“This means demand for rental properties is likely to continue to grow, making rents ever higher.”
Alex Lyle, director of Richmond estate agency Antony Roberts:
“Yet another interest rate rise, coming on the back of so many and with the potential for more to come, creates further uncertainty for the housing market.
“Although some areas have proven remarkably resilient to rising interest rates, inevitably this is less the case the higher they go.
“This latest rate rise will give those buyers who were perhaps wavering another excuse to back out.
“Many buyers and sellers are already sitting tight until the autumn in the hope that the situation will be clearer by then, particularly if inflation continues to fall.”
Kellie Steed, Uswitch.com mortgage expert:
“How will lenders respond to the base rate rising again?
“The Bank of England Monetary Policy Committee has today announced the 14th consecutive rise in the UK base rate, which now sits at a 15 year high of 5.25%.
“This one has certainly been more difficult to predict and will likely come as a surprise to some economists, who believed that we’d seen rates peak for now.
“The slight reduction in inflation reported in July, led some to believe that the base rate would stay put this time.
“Although the majority felt that with inflation still above 7%, either a 0.25% or 0.5% raise in the base rate was likely.
“What most mortgage holders will be waiting to see, of course, is how today’s announcement will impact mortgage rates.”
Steve Seal, CEO at Bluestone Mortgages:
“Today’s decision to hike interest rates by 0.25% to 5.25% – the 14th consecutive rate rise – is unsurprising as the country continues to combat stubbornly high inflation and cost of living pressures.
“Though many mortgage borrowers are already being squeezed to the limit, a silver lining may be on the horizon as lenders are starting to cut their rates following better-than-expected inflation data.
“For those worried about keeping up with their mortgage payments or struggling to climb onto or up the property ladder during these challenging times, know that help is always at hand.
“There are mortgage brokers and specialist lenders out there whose ultimate duty is to help customers find a solution unique to their circumstances so that they can reach their homeownership dreams.”
Mark Harris, chief executive of mortgage broker SPF Private Clients:
“After 14 rate rises in as many meetings, it’s time for the Bank to press the pause button.
“Give this latest rate rise time to take effect and see how the markets react before deciding whether to continue with these rate increases.
“Consecutive rate rises have been painful; it’s time to let them do their job, rather than causing continued anxiety and distress for borrowers.
“Those with a base-rate tracker will see their mortgage rate increase by 25 basis points.
“A borrower with a £250,000 repayment mortgage on a 25-year term and a current pay rate of 4.5% will see their monthly payments rise from £1,390 to £1,425.
“The cumulation of 14 successive rate rises is significant. A borrower with a £250,000 mortgage on a tracker pegged at 1% over base rate will have seen their monthly payments rise from £943 in December 2021, when base rate rose from 0.1% to 0.25%, to £1,649 today.
“Lenders have already priced this increase into their fixed rates so we don’t expect pricing to rise.
“Indeed, a number of lenders have reduced fixed rates in the past few days on the back of calmer Swaps, which underpin the pricing of fixed-rate mortgages.
“The extreme volatility we have seen in Swaps over the past few weeks has settled following June’s better-than-expected inflation data.
“However, while other lenders may reduce their fixed rates, long gone are the days of rock-bottom pricing.
“Borrowers due to come off cheap fixes face a real payment shock, so it is important to plan ahead as much as possible and act now.
“Rates can be booked up to six months before you need them so speak to a whole-of-market broker as to what’s available. If when you come to remortgage rates are cheaper, borrowers can choose another deal.
“If you are not due to remortgage for a year or two, pay down other, more expensive, debt, cut unnecessary spending and consider overpaying on your mortgage if possible to lessen the pain when the time comes.”
Adrian Anderson, director of property finance specialists Anderson Harris:
“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 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 2.2m 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 install some confidence into the property market.”
Paul McGerrigan, CEO at fintech broker Loan.co.uk:
“It was a sure bet that the MPC would make its 14th successive rise in interest rates in an attempt to ensure inflation continues its downward trend.
“The feeling is they will go again at least one more time.
“Wielding its blunt tool of rate hikes heaps further misery on those with tracker and variable mortgages, as well as placing a slow stranglehold on other borrowers.
“The easing inflation situation to 7.9% last month, coupled with the latest data from the British Retail Consortium which shows price growth is in a steady decline, should ordinarily lift the pressure on the MPC to continue its pattern of rises – however, rising mortgage approvals and a five-year peak in consumer borrowing have clearly tipped the balance in favour of more punitive rate rise this month.
“There is a silver lining. Economic indicators hint that inflation should continue on a steady – if slow – downward trajectory, meaning that interest could be close to peak bringing relief to mortgagees towards the end of the year.
“It will depend on whether increasing wage strength continues to put pressure on persistently high inflation in services, and the level of impact on global commodity prices events in Ukraine and India have.
“For now, it will be for advisors to be on their toes to assist those struggling with interest rates which have stretched them too far.”
Kevin Brown, savings specialist at Scottish Friendly:
“After today’s 0.25% hike, we are hopefully nearing the end of this record-breaking run of consecutive rate rises.
“If inflation continues to slow, then the Monetary Policy Committee will be hard-pressed to keep pushing rates higher.
“However, while we may be approaching the peak, the struggle is far from over for households. The Prime Minister has suggested today that there is light at the end of the tunnel, but the MPC doesn’t expect inflation to return to its 2% target until Q2 2025.
“Higher prices are bedded into the economy and are still rising quickly in some areas, such as food and drink. Families’ mortgage payments are going up, often by hundreds of pounds a month, and rents are also rising sharply.
“This net result is that people are withdrawing money from their savings and borrowing more at a time when the cost to do so is sky-high.
“The best households can do is to take action to protect themselves from higher price and higher rates where they can. Shopping around to find the best deals on your mortgage, savings and investments, and credit is now more important than ever.”
Phillip Nelson PhD, research officer for Propertymark:
“An interest rate rise of only 0.25% has been widely anticipated since June’s inflation figures.
“Seeing this come to pass is a good sign that we will soon see interest rates peak.
“Peaking rates will be a positive sign for many homeowners, and even lays out some hope that fixed mortgage rates will start to fall.”
Brian Murphy, head of lending at Mortgage Advice Bureau:
“After a positive inflation reading last month, many would have hoped for a pause in interest rates rising. However, it was not to be the case.
“The Bank of England has decided that more needs to be done to stamp out the stickiness of inflation in the economy. In doing so, mortgage holders may need to hold out a bit longer.
“Many will be hoping that we are nearing the peak of interest rate hikes.
“Rates on fixed-term products have been dropping marginally in the past few weeks, and there remains hope that they will continue to do so, despite the decision to increase overall rates for a 14th time in a row.”
Simon Webb, managing director of capital markets and finance at LiveMore:
“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 suite.
“In the UK this is now at a 15-year high, with a 5.25% base rate last seen during the global financial crisis in February 2008.
“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.”
Mark Tosetti, group partnerships director of ONP Group:
“As widely anticipated, we have a fourteenth interest rate rise, but have thankfully avoided a repetition of the half-point increase witnessed in June.
“Mr Sunak’s aspiration to halve inflation this year looks grim despite June’s encouraging drop. It does raise the question, what is the optimal inflation level required for economic stability, before the MPC can consider cutting interest rates?
“There is a prevailing belief that interest rates may peak a little higher, but confidence is growing that there will be a decrease further into the year.
“Only then will we see the much-needed certainty in the cost of borrowing and the return of stability for swap rates. This would then lead to an increased availability of products that better meet the needs of consumers.”
Samuel Mather-Holgate of Mather & Murray Financial:
“Increasing rates, knowing the last rises haven’t been felt yet, and whilst inflation is falling, is absolute lunacy.
“Only one member of the Monetary Policy Committee wanted to maintain its previous level and they should be applauded.
“This further rise will add misery to homeowners and those with business finance. An already lifeless housing market will shrink further into itself, not to reappear until Spring.
“The Governor needs to get a grip and reverse these hikes before the end of the year. Thankfully, the next inflation print might just give him the impetus to pause and reflect on his insane mission to bash borrowers.”
Amit Patel, adviser at Trinity Finance:
“This is unmitigated madness. This is another nail in the coffin for millions of mortgage holders and small to medium-sized businesses that are the lifeblood of the economy.
“Consecutive rate rises so far have not controlled inflation, which has been compounded by the energy crisis, Brexit and food prices due to poor harvests globally and ‘greedflation’ by the supermarkets.
“Effectively, the Bank of England is triggering a recession, which is both reckless and irresponsible.”
John Choong, equity analyst at investing comparison platform, InvestingReviews.co.uk:
“The Bank of England’s decision to raise bank rate by 0.25% will come as a relief to investors and lenders alike.
“Inflation continues to show encouraging signs of cooling given the recent data surrounding shop price inflation and July’s lower services PMI figure.
“Therefore, this decision seems to be the right one for now. In response to this, gilt yields have continued their fall on the back of the announcement, with mortgage rates also expected to follow suit.
“This has the potential, ironically, to inject some life back into the housing market. That said, any relief may be temporary as all eyes will now be on average weekly earnings data in 12 days’ time.
“Any surprises to the upside could undermine the recent progress made and spark another round of turmoil.
“However, Britons will be holding their breath for a cooler-than-expected figure, in hopes that the worst of the mortgage crisis has passed.”
Michelle Lawson, director at Lawson Financial:
“This is no longer a shock anymore and I think it is all starting to become a ‘no-news’ item for most people, who are becoming numb to it.
“The decision to raise again without seeing what the impact of the constant rate rises to date has been, is just puzzling now. It will be interesting to see what happens with the inflation figures on 16th August.”
Stephen Perkins, managing director at Yellow Brick Mortgages:
“Thursday’s 0.25% increase in the base rate from the Bank of England was widely expected given inflation is still far above the government target of 2% and following the US federal reserve recently increasing their rate despite much lower inflation.
“Fixed mortgage rates have already priced this increase in so there should not be any lender rate increases and these may even continue to reduce slightly as lenders feel the base rate is close to peaking.
“Sadly, the positive news on inflation recently has been mainly due to agriculture and fuel and is not down to the Bank of England and their constant hiking of the base rate.
“So, I do not expect today’s increase to help at all with inflation. The voting numbers show we should expect another increase next month with confidence.”
Jonathan Burridge, founding adviser at We Are Money:
“There is nothing to see here. The Monetary Policy Committee has acted as predicted, and predictability is essential for a calm market.
“A calm market means SWAP rates settle and that will mean a drop in fixed rate pricing as we are already starting to see.
“We are not out of the woods yet, and further rate rises may still be on the horizon. All eyes are going to be on this month’s inflation figures. “
Craig Fish, managing director at Lodestone:
“This latest increase was pointless and ill-thought-out. The MPC is using the same tool that hasn’t worked the last 13 times they used it and won’t have any effect this time either.
“The only people this is going to affect are those on tracker mortgages. It won’t have any impact on fixed rates at all as this increase is already factored into current offerings.
“The more important date for mortgage rates is the 16th of August, with the release of the inflation data.”
Graham Cox, founder of SelfEmployedMortgageHub.com:
“An unnecessary base rate rise in my opinion, with the effects of the most recent rises yet to fully feed through into the economy.
“Every new increase tips the UK closer to recession and is causing massive hardship already. Throwing out the baby with the bathwater spring to mind.”
Anil Mistry, director at RNR Mortgage Solutions:
“The outcome was in line with expectations and represents a considerable improvement compared to the initial 0.5% forecasted rate rise.
“Consequently, this development has exerted a discernible influence on swap rates, causing a decline over the past fortnight.
“As a direct consequence, mortgage lenders have responded by reducing their interest rates.
“Should there be no escalation during the upcoming future meetings, there could be optimism that we may witness further reductions in swap rates, potentially leading to a subsequent decline in mortgage rates.”
Caroline Luxmore, CCO at Ashman Bank:
“The Bank of England’s 0.25% increase in interest rates for the 14th time in a row is impossible to ignore and will have an impact yet again on first home buyers as well as homeowners and landlords who need to renegotiate their mortgage terms.
“With mortgage rates expected to continue to remain at the 6% high we saw hit in June, there has already been a 100% increase in people searching for ‘help with mortgage payments’ in the last 12 months, which no doubt is due, in part, to the continued rise in mortgage rates and many people looking for support with their monthly repayments.
“Given the continued hike in interest rates that we’ve seen so far this year, I expect that rates will continue to sit around this level and are unlikely to significantly drop in 2023.
“As a result, the need for short-term lending in the market has increased and the utilisation of bridging loans for funding a property purchase is likely to only grow as it provides a practical and alternative loan option for buyers in this climate.
“Interest rates hitting 5.25% today is not welcome news, but it is down to banks and other financial institutions, particularly under the FCA’s Consumer Duty rules that came into play this week, to help ensure that customers are well informed about all alternative options to reduce the negative impact that will be felt by the industry and its customers.”
Mike Stimpson, partner at Saltus:
“The base rate increase to 5.25% today comes as no surprise given the current economic climate.
“That being said, given the current rate of inflation, a repeat of June’s half-point rise was also on the cards today, but it is welcome news that this hasn’t materialised.
“Our latest Saltus Wealth Index report, published last month, highlighted that nearly nine in ten (89%) of High-Net-Worth Individuals are worried about rising rates impacting their monthly mortgage payments.
“The report also revealed that 35 to 44-year-olds are experiencing the biggest pressure on their finances as a result.
“Nearly 40% said that rising mortgage payments had already placed a strain on their cashflow, whilst 47% said that they expect to feel the pinch in the coming months.
“Looking further ahead, we expect interest rates to remain high, potentially reaching a peak of 5.75% in the first quarter of 2024.
“While rate rises have cooled inflation in the last month, they have not had a sufficient impact to have the Bank of England consider bringing the base rate back down.”
Nicholas Hyett, investment manager at Wealth Club:
“Central bankers will be fed up with questions about whether they’ve reached their destination.
“But that doesn’t mean they’ve gone away. Is this the peak for rates, or has one of the most painful interest rate accelerations in living memory got further to go?
“The MPC is sitting on the fence in these minutes. Recent strength in wage growth has clearly got Bailey & co. worried.
“But there’s also a recognition that the past rate rises are starting to weigh on economic activity, which has led to a slight slowdown in rate rises.
“But the penultimate line of the summary says it all. ‘If there were to be evidence of more persistent pressures, then further tightening in monetary policy would be required.’
“The Bank is determined to keep its eyes on the monetary road regardless of the noises coming from the backseat.”
Riz Malik, founder and director at R3 Mortgages:
The rate hike was anticipated, yet two members advocated for a more assertive approach, proposing a 0.5% increase.
“Given that there are three more rate decisions slated for the remainder of the year, we can likely expect additional hikes.
“The fresh forecast projects that CPI inflation will resume its 2% target by the second quarter of 2025, which is a more extended timeline than initially projected.
“The forthcoming batch of inflation data, scheduled for release on the 16th, will provide some insight into the likely economic trends for the rest of the year.
“It’s unfortunate that Dr. Bernanke’s evaluation of the Bank of England’s forecasting concludes only next year, with the results to be disclosed in the spring.
“Given 14 consecutive rate hikes and yet inflation remaining unmanaged, my trust in the Bank’s strategies has hit a historical low.”
Andrew Montlake, managing director at Coreco:
“Another month and yet another rise from the Bank of England, which seems hell-bent on inflicting further misery on mortgage holders and those with aspirations to buy.
“This further rise seems an unnecessary step too far, and we can only hope that the Bank now sees sense and pauses for breath as this, and previous rises, finally work themselves through the economy, before they cause any lasting damage.
“The good news is that swap rates have eased recently on the expectation that we are now very near or at the peak of the current rate cycle, and although tracker mortgages will increase on the back of today’s decision, we may well see fixed rates continue to ease slightly, especially as lenders look to get a better start to next year.
“The next inflation report and subsequent words and actions from the Bank of England are crucial to us all. We know taming inflation is imperative, but to every action there is a reaction further down the line.”
Gareth Lewis, managing director of property lender MT Finance:
“With yet another rate rise from the Bank of England, one wonders whether the true impact of successive rate rises is actually having the desired effect.
“With so many homeowners on fixed-rate mortgages, there is a time lag before they come off their existing rates and the increase in interest rates has an impact.
“By raising Bank Rate, the Bank is being seen to be doing something to tackle inflation but is it actually working?
“There may be a case for leaving alone for a while and waiting to see what impact these successive interest rate rises is actually having, particularly as we come out of the summer holidays when the picture is distorted.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman:
“A small rise in rates had been widely expected but the pace and size of these increases is almost as important.
“Lenders have already allowed for another uplift in rates to their mortgage pricing and there are hopes that mortgage rates should start edging downwards.
“While a quarter-point rise won’t be welcomed by borrowers on variable rates, it is a positive in a way as rates could have risen by more than that, as they did at the last meeting.
“Confidence and expectation that rates are at, or near, their peak make such a difference to homebuying decisions.
“We have already seen quite a bit of talk about rates coming down, so it is clear to us that many are sitting on their hands before making any big buying decisions.”
Nick Leeming, chairman of Jackson-Stops:
“Although expected, it is fair to say that most were hopeful that the Bank of England would have refrained from yet another rate rise, with this now being the 14th hike in a row.
“Today offers a very different picture to December 2021, when the base rate sat at 0.1%. But green shoots are growing by the day.
“Inflation is now falling, which suggests that the tide may be turning, and if this remains the case for July and August, this could be the last rate hike for some time allowing investment markets time to settle again.
“For the property market, while incremental changes to the base rate won’t derail buyers and sellers plans entirely, the increased pressure that has been put on the cost of borrowing means realistic property pricing is essential to achieve a sale, especially at the mid-level of the market.
“What is good news for the transaction market is that mortgage approvals have continued to increase.
“Mainstream lenders have announced rate cuts on their mortgage deals and first-time buyers remain active, often the lifeblood of our industry.
“Across the Jackson-Stops network we have seen a 13% increase in completions in July compared to June, showing that committed buyers remain resolute in their searches.
“It’s too soon to tell what the race to the end of the year will look like; while it’s still not a sprint to the finish, it is certainly not a marathon either.
“For now, the market remains buoyed by continued exchanges and steady demand levels from an intersection of buyers. It’s clear the market is far from static even in the face of economic headwinds.”
Emma Hollingworth, managing director of mortgages at MPowered Mortgages:
“Today’s decision by the Bank of England to raise interest rates for the 14th successive time will be a blow for homeowners who are already struggling with the rising cost of borrowing.
“However, the markets have already priced this rise in to the cost of fixed rate borrowing, so it is unlikely we will see fixed rates change in reaction to this news.
“Indeed, with inflation now starting to fall, we may now be approaching the top of the Bank Bank Rate cycle which may give homeowners some respite going forward.
“Whilst the outlook for homeowners and homebuyers is still far from rosy, we have had a few positive signs in the last couple of weeks, with swap rates falling and hopefully having now peaked.
“It may still be sometime before we get back to any sense of normality but at MPowered we will be working to ensure that innovation, AI and a data-driven process can at least make the mortgage process that bit quicker and easier for brokers and their customers.”
Julian Jessop, economics fellow at the free market Institute of Economic Affairs:
“The Bank’s decision to raise rates again, albeit by just a quarter point, suggests that the MPC is still looking in the rear view mirror.
“Money and credit growth have already slowed sharply and other leading indicators of inflation have weakened, including commodity prices and evidence from business surveys.
“It would have made more sense to pause to assess the impact of the large increases in rates that have already taken place, as other central banks have done.
“The UK economy is like a frog slowly being cooked by ever higher interest rates. By raising the temperature further now, the Bank risks doing too much and, once again, only realising its mistake when it is too late.”
