Bank of England raises interest rates for 10th successive time
The Bank of England’s Monetary Policy Committee (MPC) has voted to raise the base rate from 3.5% to 4%.
It marks the tenth time in just over a year that the Bank has increased rates and now stands at a 14-year high.
The Bank said global consumer price inflation remains high, “although it is likely to have peaked across many advanced economies, including in the United Kingdom.”
“Wholesale gas prices have fallen recently and global supply chain disruption appears to have eased amid a slowing in global demand.”
“Many central banks have continued to tighten monetary policy, although market pricing indicates reductions in policy rates further ahead.”
The Bank of England’s projections show that the rise in inflation is likely to fall sharply over the rest of the year, but uncertainties remain.
The rise, which took effect on February 1, 2023, is expected to affect those on tracker mortgages, who will need to factor the rise into their monthly budgets.
According to Rightmove’s property expert Tim Bannister, many tracker mortgage holders will still have lower rates than most fixed-rate deals, so a rush to switch to fixed-rates is unlikely.
However, the gap between tracker and fixed-rate mortgages is narrowing, which may prompt more homeowners to consider their options.
For those planning to take out a fixed-rate mortgage, the good news is that the rate increase was widely expected by financial markets and has likely been taken into account.
This means that fixed-rate mortgage deals may continue to decline in the first half of 2023 as the market stabilises.
Buyer demand remains higher than the last normal housing market in 2019, and a decline in fixed-rate mortgage deals may encourage more people to make moves.
However, Bannister warned that further base rate increases later in the year could impact mortgage rates, but it is difficult to predict how.
The MPC’s remit is to ensure that inflation returns to the 2% target sustainably in the medium term and to anchor long-term inflation expectations at that level.
The recent increases in the base rate are expected to have an impact on the economy in the coming quarters and the MPC will continue to monitor inflationary pressures, including labour market conditions, to determine if further tightening is necessary.
Spotted something? Got a story? Send a Facebook Message | A direct message on Twitter | Email: News@Deeside.com