The Bank of England’s Monetary Policy Committee (MPC) has today increased the base interest rate from 4% to 4.25%. This latest rise signals the tenth consecutive increase, since the rate reached a record low of 0.1% in December 2021.
Many had expected the rate to be held this month with MPC member Swati Dhingra warning that increases risk “deepening the pain” for households. Dhingra went further saying “a prudent strategy would be to hold policy steady”.
It is thought a number of MPC members were particularly concerned about consumers sensitivity to rate movements, especially given a huge segment of UK mortgage rate holders are due to remortgage in the near future…. now at much higher borrowing costs.
Inflation continues to rise, putting pressure on the base rate
It appears a surprise jump in inflation reported on Wednesday is to blame for the Bank’s decision to increase. Inflation surpassed its forecast level, rising from 10.1% to 10.4%, instead of the 9.9% many city analysts had been expecting.
Prices in the UK rose at a faster pace last month compared to January, due to “rising alcohol prices in pubs and restaurants following discounting in January,” Grant Fitzner, Chief Economist at the Office for National Statistics (ONS), said. Food prices have also increased more than 18 per cent over the last year, the quickest increase since records began.
Britain is now a clear outlier in the “wealthy world” as the inflation rates of most of it peers have fallen steadily since the autumn of last year. The US, for instance, has not seen an increase in inflation for the last 6 months, while inflation in the Eurozone has also been on a steady downward trajectory.
But was does this mean for the mortgage market?
Olivia Harland, Senior Mortgage Consultant at specialist mortgage broker, Professional Contractor Mortgages, had this to say:
“The markets seems to be changing daily at the moment but the good news is mortgage borrowing rates have been relatively stable. There are still some really good options out there but you need to look a little harder to find them”
“I am in contact with clients whose mortgages aren’t due for another 12 months, but we are reviewing the market and working a plan to ensure we can secure rates at the opportune moment”
If you are looking at a new purchase or to remortgage at the end of your current deal, speak with one of the PCM team as soon as possible. The advice may be to hold tight, but 10 minutes of your time could help form a plan that could save you a lot of money and time in the future.
Call Professional Contractor Mortgages on 02394 212912 for specialist advice from our qualified mortgage brokers, or complete our online contact form here.