They say that nothing in life is certain except, of course, death and taxes. Well, somewhat depressingly, it would seem that we can add a monthly rise in the Bank Rate to that list – does three things make a list? We’re not sure.
The Bank of England’s Monetary Policy Committee (MPC) has today voted to increase interest rates again. The vote was 6-3 in favour of the 0.5% rise, and they now sit at 3.5%, their highest level for 14 years. The Bank is continuing to try and stem the impact of soaring prices in the UK. The latest rise is now the ninth time in a row that the Bank has pushed the up button.
Of course, another rise doesn’t feel remotely like a Christmas present any of us wants. But the good news (we use the term relatively) is that the rise was utterly expected by the market and mortgage lenders alike. We believe that the rise has already been factored in by the vast majority of mortgage lenders and we are not expecting to see immediate product withdrawals on the back of it.
Looking, as we always do, to swap rates – a key determiner of fixed rate mortgage pricing – they have been coming down recently. They stand, at the time of writing, in the five-year market at 3.7%. For context, just two days ago, they were almost 3.8% and the expectation of a 0.5% rise was exactly the same 48 hours ago.
The Bank has indicated that there may well be further rises next year, but we feel that we may well be approaching the peak of where Bank Rate will end up. The Bank, and indeed the Chancellor have stated that inflation has already peaked (it eased off ever-so slightly last month, albeit from a very high level). And, interestingly, looking at the minutes of the latest meeting, two members of the committee actually voted to leave the rate at 3%. Their reasoning was that the weak economy, signs that previous rises were already impacting the jobs market and that the full effect of those previous rises were still to come through.
Finally, looking at a more macro level, the Bank indicated that the economy performed better than expected between October and December. It is now expecting it to shrink by just 0.1% in the final quarter of the year, compared with previous expectations of 0.3%. It’s another one of those bronze linings we have spoken about before.
What should borrowers do now?
As we mentioned a moment ago, we think that this rise has been factored into mortgage pricing from many lenders. We still remain in the position of not really knowing, at least generically speaking, whether fixed rates or discount rates are the product of choice right now. If we believe that the highest rates will go is 4 %, then there is certainly value to be had in the discount and tracker market right now. And that may even be the case if they go a little higher. But one thing we do know for certain right now. Nothing is certain (except, of course, those pesky death and taxes).
At the risk of saying what we have been saying for quite some time now, only individual advice will do. We know we have somewhat of a vested interest here, but we really believe that if ever there was a time to get professional mortgage advice based on your unique circumstances, it is now. Of course, we’d love you to do that with us. But, no matter what, do it with someone. If you need us, you know where we are.
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