
In a much-trailed announcement, the Bank of England’s Monetary Policy Committee has today announced that it is increasing the Bank Rate to 0.5%. Quite incredibly, this is the first back-to-back Bank Rate rise in almost 18 years.
When we offered our thoughts on the last raise in December (there was no meeting in January) we thought that the only reason the bank didn’t raise it by more was because of the Omicron variant of Covid 19. So, given that Omicron has turned out to be less troublesome than its predecessor, it is of little surprise that the Bank has taken the decision to move upward again. The only surprise for some market commentators was that they didn’t move it by more.
The Bank is undoubtedly reacting in a bid to cool soaring prices in various areas of the economy. Latest figures show that inflation is running at 5.4%, but the Bank themselves have gone on record saying that it could hit 7.25% by April. In case you need reminding, their annual target is 2%. Given the significant disparity between reality and the target, we can probably expect one or two more rises this year now.
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.
Our overall message remains one of calmness. Don’t forget, the Bank Rate stood at 0.75% before the pandemic, and everyone (quite rightly) thought that was super low. The rate rise was expected, and lenders haven’t really made any move to pull their products. 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.
The biggest challenge for borrowers remains lender service levels. Increasingly, many lenders are taking a 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.
But, overall, there’s no need to panic.
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