REACTION: Bank of England raises base rate by 0.5% to 5%

Despite worries that a higher rate will damage the property market, the BoE believes getting inflation under control is more important.

Bank of England Andrew Bailey

The Bank of England (BoE) has raised interest rates by a 0.5% to 5% as it battles to keep the UK’s persistently high inflation under control.

Inflation is currently running at 8.7%, down from recent months but far above the BoE’s 2% target.

This follows last month’s decision to raise its base rate by 0.25% to 4.5%, the 13th time it has raised them since the beginnig of last year. It expects rates to rise to 4.45% before inflation begins to drop back, reducing to 3.5% by the end of the year.

As yesterday’s inflation report from the Official of National Statistics showed, although the economy is expected to grow in the coming months, huge food price increases in particular are driving up the nation’s overall inflation figure.

The property industry will see, and has already seen, the direct impact of the bank’s policy with higher mortgage rates for those on variable rate loans, and those coming off fixed rates, undermining home buyer, mover and landlord confidence.

As the BoE’s governor, Andrew Bailey (main picture) said recently: “We know that higher interest rates make things hard for many people too.

“But we’re conscious that high inflation always hits the least well-off the hardest. Our job is to make sure inflation is low and stable, so we have had to raise rates to bring inflation back down.”


nathan emerson tenant referencingNathan Emerson (pictured), Chief Executive for Propertymark, says: “It’s undisputed that homeowners and first steppers will be facing the consequences of rising interest rates as borrowing costs increase. However, with this comes a further shift towards more realistic and sustainable house prices down from the spike seen during the pandemic.

“Confidence from sellers is undeterred with our latest data showing a 70% increase in properties available for sale compared to April 2022 and in turn, this is providing buyers more room for negotiation as well as more choice.”

Dominic Agace - Winkworth - imageDominic Agace (pictured), Chief Executive of leading estate agency Winkworth, says: “These rises will undoubtedly cause stress to homeowners even though they have remained within the mortgage stress tests since 2015.

“The market is delicately balanced, having surprised so far this year in terms of positive levels of activity.

“With the structure of the mortgage market, we expect the impact to feed through slowly, averting any significant price falls as a result, with pipelines remaining intact as buyers seek to ensure they keep their existing mortgage offer rather than challenge the pricing.

“Continuing lack of supply and rent increases will continue to support the case to buy where affordability allows.”

image of Jason Tebb OTM

Jason Tebb, Chief Executive Officer of (pictured), says: “This latest base rate rise was widely expected by the money markets as the Bank of England battles to curb the stubborn level of inflation, holding at 8.7% in May, but the 50 basis-point increase, taking rates to 5 per cent, is perhaps more aggressive than many had hoped for.

“The 13th rate rise in as many meetings will further exacerbate increasingly stretched affordability and is set to have a negative impact on the confidence of the average property seeker relying on a mortgage.”

Link to news of movers and shakersRightmove’s mortgage expert Matt smith (pictured) adds: “Yesterday’s inflation figures were disappointing, however today’s Base Rate rise won’t come as much of a shock to lenders who have already been increasing their fixed-rate mortgages sharply in anticipation of today’s rise.

“The Bank appears to have opted for a larger Base Rate rise this month than some commentators predicted to try and address the underlying issues driving inflation, and it continues to forecast that inflation will drop sharply in the second half of the year.”




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