After months of speculation, the Bank of England has finally pulled the trigger on a rate rise, voting unanimously to increase rates by 0.15 per centage points to 0.25 per cent at its December meeting.

With interest rates so low for so long, boosting the UK economy and helping fuel the housing market, pushing property prices to their highest ever levels, an upwards adjustment was always on the cards. It was just a question of when, with many thinking it would be last month’s meeting rather than December’s. However, yesterday’s inflation figures, which hit 5.1 per cent – more than twice the Bank’s 2 per cent target and the highest level in more than a decade – may have finally persuaded the ratesetters that they couldn’t delay their decision for any longer, even though they don’t typically move interest rates in December.

While this is a minimal increase, and likely to be the first of a few gradual raises over the next couple of years, it should help keep inflation in check, as well as dampen down the prospect of future house price increases. This is welcome, as the market has been frenzied over the past year as buyers rushed to take advantage of the stamp duty holiday.

With buyers competing in the race for space and no longer having to work from the office quite so much so they can consider more far-flung locations, the housing market has been exceptionally busy. As stock levels are low, as downsizers stay in large family homes rather than sell up, move somewhere smaller and face the stamp duty tax hit, property prices are unlikely to start falling anytime soon.

End of cheap mortgages?

With banks and institutional mortgage lenders still very much liquid, competition on mortgage pricing is likely to remain high. There may not be the plethora of sub-1 per cent rates which we have seen this year but mortgages will still be affordable and on the relatively cheap side from an historical perspective. Two-year fixes are now available for not much more than the magic 1 per cent figure, so while pricing has edged up in anticipation of this rate rise, mortgages will still be relatively affordable.

With the Bank of England confirming this week that it will consult on removing the rate rise stress test for mortgage borrowers, brought in via the Mortgage Market Review after the financial crisis, this should also make it easier for first-time buyers in particular to get on the housing ladder.

What’s next – and how we can help

Too much of an increase in mortgage rates cannot happen too quickly as that would cripple mortgage borrowers on variable rates, along with others who are coming up to their term end and needing to refinance. It would also massively damage confidence in the housing market, something the Treasury will not be keen on given it has proven to be such a money spinner for the wider economy.

With the housing market set to be busy as we move into next year, and a significant increase in property for sale unlikely, if you are not a cash buyer then getting your finance arranged quickly enough to put yourself in pole position compared with the competition can be a challenge. With first and second-charge bridging loans available, MT Finance can support those looking for short-term funding to make themselves as desirable as possible to vendors who can choose between who they sell their property to.

We can arrange bridging finance within hours, lending from £50,000 up to £10m at 70 per cent loan-to-value. Terms are from one to 24 months. For more information, we can be contacted here, via phone on 02030512331, or on email, using enquiries@mt-finance.com.