Industry responds to BoE interest rate hike

Following the Bank of England’s (BoE) interest rate hike from 0.1% to 0.25%, many industry figures quickly reacted to the news.

The Monetary Policy Committee voted eight to one to increase the rate following increased pressure from the International Monetary Fund (IMF).

Kate Davies, executive director of IMLA, said the BoE’s decision on interest rates would have come as a surprise to many, with popular opinion expecting the bank to postpone the increase until after the holiday season.

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She said: “However, the move appears to be a proportionate and appropriate response to recent increases in inflation and, in truth, the effect on the mortgage market may remain minor in the short term.”

With many borrowers currently on fixed-term mortgages and rates still remarkably low, Davies said she doesn’t expect to see the effect of the decision until 2022.

She added that a major concern will be the effect of this decision on vulnerable borrowers, who are more exposed to the consequences of the rate hike.

Mark Harris, managing director of SPF Private Clients, said the interest rate hike was in fact expected, although still surprising, as the Bank of England tends not to change rates in December.

He added: “However, with inflation peaking in 10 years, it seems the committee felt it was finally time to move.

“The markets have already incorporated a handful of rate hikes and mortgage prices have already risen slightly as a result.

“Lenders have pulled their cheapest rates, although there are still many competitive offers available starting at as low as 1%.”

Those with variable rates will see their monthly costs increase, but this will be a fairly modest increase with rates remaining at incredibly low levels.

Harris explained that if borrowers are concerned about further rate hikes, it is worth getting into a fixed rate deal as soon as possible.

Eleanor Bateman, Policy Manager at Propertymark, said: “The base rate hike to 0.25% is a small and necessary step and one that most have been anticipating for some time.”

Mortgage rates have risen steadily over the past few months, and although variable rate ones will see their payments increase, the cost of borrowing has remained low from historical levels.

Bateman added, “With indications that lifestyle factors continue to drive many people to move, we don’t expect today’s announcement to have a significant negative impact on the market. Marlet.

“Persistent uncertainties over COVID-19 may have more lasting effects, however, and we urge the UK government to take the importance of the real estate sector into account in any upcoming decisions on further tightening of measures related to the pandemic.”

Paul Broadhead, head of mortgage and housing policy at the Building Societies Association (BSA), said a rate hike is an important psychological moment as it is the first time the bank rate has increased since August 2018.

He said: “With rising energy and food costs and tax hikes coming next year, it helps that eight in ten mortgage borrowers have a fixed rate.

“The 20% on variable rate mortgages should see their payments increase, but I expect the increase to be modest, tempered by the very competitive mortgage market which is still fueled by relatively high demand and supply. sparse housing. “

Broadhead also said that lenders are sensitive to the growing number of people facing a tight family budget.

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