Bank of England raises interest rates to 0.5%

The Bank of England’s Monetary Policy Committee has voted to raise interest rates by a quarter point to 0.5 per cent by a majority of 5-4. The minority of committee members voted for an immediate half-point rate rise, which would have taken rates to 0.75 per cent, suggesting there are further rate rises on the cards. The Bank also voted to start reducing quantitative easing.

This rate rise comes as no surprise as it is an absolute necessity as a first step towards calming inflation, which soared to a 30-year high of 5.4 per cent in December and has already begun to impact the broader economy. The price of everything seems to be rising – property prices, energy bills and the cost of labour to name but a few – which is hitting affordability hard.

The rate rise will be an early warning to UK households of further increases to come, which consequently will mean higher mortgage costs. That said, borrowers needn’t panic just yet as we don’t expect this rate rise to have a significant impact on pricing in today’s mortgage market as it follows earlier significant movements in SONIA (Sterling overnight interbank average rate), which have thus far been absorbed by an industry flush with liquidity.

With banks and institutional mortgage lenders still very liquid, competition on mortgage pricing will remain high, helping keep mortgages at affordable levels for now. Those sub-1 per cent deals we saw last year have long gone but mortgages are still relatively cheap from an historical perspective.

how we can help with your investment purchases

As the housing market got off to a brisk start in January, with an uptick in new buyer registrations coupled with limited stock levels, competition for property is set to continue. If you’re looking to purchase an investment property and not in the fortunate position to be a cash buyer, getting your finance arranged fast enough to put yourself at the front of the queue can be challenging. With first and second-charge bridging loans available, MT Finance can support those looking for short-term funding to make themselves appear as desirable as possible to vendors.

For more information, contact us here, email enquiries@mt-finance.com or phone 0203 051 2331.