The Bank of England Monetary Policy Committee today voted by 7-2 to increase interest rates by a further 0.25% to 4.25%.
This is the 11th successive increase and takes rates to their highest level since 2008.
Andrew Montlake, MD of Coreco Mortgage Brokers comments, “They say a week is a long time in politics, but a day is an aeon in the financial markets.
“In the past few days, we have seen the contradictory effects of a banking drama pushing rates down on the one hand, and the surprise rise in inflation pulling in the opposite direction.
“These opposing forces left the Bank of England with no real choice than to increase rates as expected by 0.25%, with doing nothing not an option and 0.5% going too far.
“What happens next is up for speculation, but I do believe that the Bank of England should now take a proverbial time-out and give both the public and the markets time to breathe and settle. A period of calm is imperative, and rate rises take time to filter through and have an effect.
“There is a saying I have heard recently that central banks tend to go too far and only stop when something breaks. Potentially we are at that point now.
“I do believe that rates will indeed fall at some stage, but the stage is not quite now, and when they do it will not be as quickly or as far as many hope.
“This rollercoaster of ups and downs could continue for some time yet, with 4% being a consistent average as it always traditionally was, with those waiting for big falls likely to be disappointed.”
On a £300,000 loan with a 20-year term remaining and currently paying 3.5%: