At the risk of repetition (a phrase we seem to be, somewhat ironically, using with some repetition) another month, another nudging upwards of the Bank Rate. The Bank of England’s Monetary Policy Committee has announced today that they have raised Bank Rate to 1%, the highest level since 2009.
That last point is a phrase you are likely to see a fair few times in the media over the next few days (because it makes good copy), but we still need to maintain a sense of perspective. Because 1% is still incredibly low. So, when you read the highly likely scare stories, we’d urge you to keep that in mind.
So why has the Bank Rate increased?
Well, of course, unless you’ve been in the middle of a self-imposed media black-out, you’ll be aware of the following. Inflation is rising with all the pace of a well filled helium balloon and, depressingly, shows little sign of being popped any time soon. Indeed, the Bank is now predicting that inflation would probably hit 9% in the coming months, an increase on their previous forecast of 8%, and is likely to breach the 10% mark by the end of the year.
As well as the usual things that influence inflation, the war in Ukraine is playing a major part in this. In fact, the Bank is putting most of the blame for inflation on the significant rise in household energy prices that the war has supposedly driven. Looking further afield, the Bank expects inflation to peak this year and fall back to 3.5% in 2023 and 1,5% by 2024. That’s something to (potentially) look forward to.
As for interest rates specifically, the Bank predicts that they will rise to 2,5% by the middle of 2023, before falling back again, Again, to be clear, this is still pretty low.
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 probably about to go up. For those with fixed rates, it’s as you were.
As with the last time Bank Rate moved, 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.
Mortgage rates are still incredibly low. If you are due to come off a deal soon then now is unquestionably the time to act. Anything within the next 6 months then we suggest you give us a call. There are some great fixed rates available for all the standard timeframes and, in particular, 5-year deals are looking really, really attractive,
And, at the risk of another round of repetition, the biggest challenge for borrowers remains lender service levels. Lenders are continuing to take 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.
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