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Bank of England increases interest rates again


Another month passes and we have another consecutive interest rate rise from the Bank of England, moving the Bank Base Rate up from 0.75% to 1%.

It is no surprise that the Bank of England has made the decision to increase rates further given the backdrop of raging inflation. The money markets have been pointing to this and are expecting further rises over the course of the next year.

Whilst many borrowers will be protected because they have a fixed-rate mortgage, there is a concern that rate rises, on top of the current cost-of-living crisis, will lead to some prospective borrowers having issues meeting affordability calculations in the future.

The Bank of England has a delicate balancing act, as while it needs to be seen to be doing something, small rises alone will not be enough to curb the current cause of inflation but could well help to tip the economy into a slowdown or even recession.

Where the current increasing rate environment ends, we do not know, though even the Chancellor has suggested that seeing Bank Base at 2.5% in the next 12 months is a reasonable expectation.

This does of course seem a big jump from where we are now, but because of all the issues we have had over the years as alluded to in the introduction, we have never been able to put rates up to “normal levels” since 2008. Perhaps without the pandemic, we would be at 2.5% now?

There are of course loads of institutions and savers that want and respond better to higher rates, and rates should not stay artificially low forever, but again we have something that could get in the way of this; a war in Europe and cost-of-living crises.

If this does start to slow things down, then competition amongst lenders will become more intense once more and rate rises may have to slow.

That said, Interest rates, although rising, are still historically low with lenders having a good supply of funds to lend.

What is interesting is a report out that tracks the average mortgage payments for Buy-to-Let landlords and rates have increased to the degree that repayments in an average BTL mortgage have already increased by over £100 per month.

As above, many will be protected on fixed-rate mortgages but for all those landlords who may have portfolios coming up for mortgage renewals it really does pay to speak to a mortgage expert (Hello!) sooner rather than waiting before rates get higher still.

In fact, for all prospective borrowers, getting in early and getting advice could now save an awful lot of money.

For those worried about the impact of inflation on their mortgage take a look at our mortgages and inflation guide.

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Andrew Montlake

Written by Andrew Montlake

Andrew Montlake, better known as Monty, began his journey with an Hons degree in Economics & Politics before starting in the mortgage industry in February 1994. As a main founder of Coreco in 2009, he successfully grew the brand, marketing, and communications, and was made MD in 2019 focussing on the overall vision, strategy, and culture of the company. As Coreco’s media spokesperson, Andrew can often be seen or heard on TV and radio as well as regularly commenting in the national, local, and trade press. He is the author of this acclaimed Mortgage Blog and is well-known for his social media, podcasts, and public speaking. Andrew is now proud to serve as Chairman of the Association of Mortgage Intermediaries, (AMI) as a cheerleader for the Mortgage Industry as a whole and continues to work at the coal face, writing mortgage business and advising clients.

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