Another month, another rise. But the devil's in the details

Another month, another nudging of the Bank Rate. Whilst we could all be forgiven for thinking this is fast becoming a habit, there’s some devil in the details that would suggest otherwise.

Last month, a study of the Monetary Policy Committee’s minutes (someone has to do it) revealed an expectation from members that February’s rise was the first in a series over the coming months. Our first impressions of this month’s minutes are that this has been somewhat toned down. One member of the committee even voted for rates to remain at 0.5% this month.

Whilst it’s hard to make any definitive conclusions about more or less anything right now, we think that the bank is concerned about the overall economic impact of the huge rise in energy and food prices and thus what further increases to interest rates would mean. Of course, somewhat paradoxically, those huge rises are driving significant rises in inflation, but whilst the bank is targeted with keeping that low, their overriding feeling seems to be that more interest rate rises soon will be a step too far. It’s a balancing act that the finest gymnast wouldn’t want to take on.

All that being said, it’s critically important to remember that rates are still, historically speaking, low. We know we have said this before, but a rate of 0.75% is the same as when we entered the pandemic

What does this mean for mortgages?

Well, firstly, if you have a variable rate mortgage that’s linked to Bank Rate, or you are paying a lender’s Standard Variable Rate, your mortgage is about to go up. For those with fixed rates, it’s as you were.

We believe that the vast majority of UK lenders knew this was coming and therefore have already priced this into their products. We’re not expecting a swathe of product withdrawals and a subsequent hike in rates. If lenders do make moves to raise their rates, we expect it to be very gentle.

So, our overall message continues to be one of calmness. At the risk of repetition, we remain in an incredibly low interest rate environment and there are plenty of excellent deals out there. If you are coming towards the end of a current deal, then it makes sense to look at your options now.

And, at the risk of further repetition, the biggest challenge for borrowers remains lender service levels. Lenders are continuing to take a reasonably long time to process cases, and that can be frustrating. To say the very least. Luckily, that’s where we come in. We know what’s happening across the market and can advise you accordingly. If you have any concerns or questions, then we’d be only too happy to help.