For the thirteenth time in a row, the Bank of England’s Monetary Policy Committee (MPC) has made the decision to increase the Bank Rate. But, this time, with a notable difference. Tasked with combating the ongoing pain of inflation (which surprisingly did not fall earlier in the week), they have increased the rate by 0.5%. It now stands at 5%, the highest level it has been for 15 years.
Before the decision there was much debate in the media and the markets. Not on whether it would move upward (that was as certain as death and taxes), but by how much. The Bank has clearly decided that the time for a little shock and awe was now.
You will no doubt have seen that a lot of the news this week has centred around mortgages and the ticking time bomb many borrowers face. With a vast amount of low fixed rate mortgages due to expire throughout the rest of the year, borrowers are going to be in for somewhat of a payment shock when they come to arrange a new deal. Sadly (and there’s simply no way to sugar coat this), there is a good deal of truth in this.
This is actually one of the big issues around the programme of continual rate rises, and something the Bank has acknowledged in its deliberations today. Because so many borrowers are on fixed rates, the full impact of these rate rises is not being felt, and won’t be for a while longer. This means that rates are potentially being pushed higher than they need to. And that’s thanks to inflation.
As always, we try to look for those silver linings (although we are inclined to rebrand them as glimmers of hope). One can be found in the Bank's belief that inflation will fall significantly in the coming months because of the fall in both energy prices and the food supply chain. We can but hope.
If you’d like to talk about how this affects you and what we can do to try and help, you know where we are.
Comments