The Bank of England’s (BoE) Monetary Policy Committee (MPC) has voted to increase the base rate from 0.25% to 0.50%.
This increase represents the first back-to-back rise in interest rates since 2004, after the MPC elected to up rates from 0.1% to 0.25% in December.
Four of the nine MPC members dissented, voting for a 50 basis point hike to 0.75%.
BoE: Availability of secured credit to households up
Kevin Roberts, director of Legal & General Mortgage Club, said: “Today’s decision will have largely been taken to curb inflation, but that won’t be of much consolation to homeowners facing stretched finances, higher debt repayments and the rising cost of living.
“Speaking with a professional mortgage adviser is an essential next step for all homeowners, with rates set to rise further, doing so now could prove to be a wise move in limiting the financial impact.”
Vikki Jefferies, proposition director of PRIMIS, added: “It is not surprising that the Bank of England has today decided to raise the base rate by another 0.25%, especially with consumer price inflation reaching 5.4% in December, its highest since March 1992.
“For many borrowers, this further rise may not have an immediate impact as most are on fixed-rate mortgages. However, for those not on fixed-rate mortgages, now may be good opportunity to switch to a fixed-rate deal, before rates change again later this year.
“Brokers will now play an integral role in supporting those looking to remortgage or for a product transfer by helping them to find one of the great deals that are still available.
“For those with complex financial situations, seeking advice is also more important than ever, and brokers should act now to help their customers lock into appropriate, affordable products while they can.”
Rod Lockhart, chief executive of LendInvest, said: “The Bank of England is stuck between a rock & a hard place, rates need to move up in order to control inflation, but the ever-increasing cost of living casts a dark shadow.
“On a brighter note, we do not expect to see a correction in house prices, given supply-demand imbalances are only adding to upside risks. We also expect mortgage rates to remain competitive, as lenders continue to protect or attract market share.”
Nick Chadbourne, chief executive of LMS, added: “For most borrowers, the effects of today’s base rate rise by the Bank of England will be minimal.
“Approximately 98% of people take out a fixed rate mortgage, and these borrowers will not see an impact until they come to remortgage at the end of their Early Redemption Charge (ERC) period.
“However, the 2% of borrowers on a tracker rate mortgage, or those coming to the end of their fixed-term, may struggle with the increased payments as a result of this rise.
“Especially at a time when finances are already squeezed due to the ongoing energy crisis causing household bills to increase and lasting effects of the pandemic.
“Collaboration across the industry will be vital to support borrowers through the challenges of the current market, ensuring brokers, conveyancers and lenders have access to the right tools to progress cases efficiently and secure the right deal for each case.”