For the twelfth time in a row (we can certainly call this a bad habit), the Bank of England’s Monetary Policy Committee (MPC) has made the decision to increase the Bank Rate. The rate now stands at 4.5%, the highest level it has been at since the height of the global financial crash in 2008, almost 15 years ago. Seven members of the nine-strong committee voted for a quarter point rise, with two voting to maintain 4.25%
There has been some debate (well, that’s an understatement of significant proportions) since the last rate rise in March as to whether we would see another one but, in more recent weeks, the mood music has turned to a definite rise. And here we are.
Let’s try and find some silver linings. As well as increasing interest rates the Bank has revealed the beginnings of economic recovery, which it believes will start this summer. It now thinks that the economy will avoid a recession and, from this point forward, will not shrink any further. That’s (relative) good news, But, of course, that awful beast of inflation will stay with us to a more significant degree well into next year. The previously trailed expectation of an imminent sharp drop has sadly disappeared. There is an expectation that it will fall, but more slowly than previously thought.
It should be noted that this outlook is likely to be incredibly sensitive to any changes in the energy market this winter. All in all, inflation is expected to remain above 5% at the end of 2023, moving towards 3-4% by the middle of 2024.
What should borrowers do now?
Given the increasing expectation of this rise over the last few weeks, the pricing has already been factored into Swap Rates (to remind you, the rate at which lenders lend to each other and a key factor in mortgage pricing). So, it remains important to state that we do not expect any knee-jerk reactions from mortgage lenders. We do not expect product withdrawals and we do not expect rates to suddenly start to rise again.
As we have said before, there is a huge amount to consider when arranging a mortgage, and its rate is only one part of that. But it’s always useful to provide a general overview of where they are. Looking at mortgage pricing, the best five-year fixed rates are around 4%, if you have a decent deposit or equity, and two-year fixed rates are hovering around 4.3-4.4%. In the tracker market, prices are, unsurprisingly, higher. Five-year rates start at around 5% and two-year at 4.4%.
As always, it’s a fool’s game to provide generic advice. Only tailored advice to your specific and individual circumstances will do. We know we say this quite regularly (alright, every time), but speaking to us before you decide what to do is the only sensible decision. If you need us, you know where we are.