"Andrew Bailey should resign"

The Bank of England (BoE) upped the base rate for the 12th consecutive time on May, 11, increasing interest rates from 4.25% to 4.5%, representing their highest level since the 2008 global financial crisis.

Seven members of the bank’s Monetary Policy Committee (MPC) voted for the 0.25% increase, while two members preferred to maintain rates at 4.25%. But what do mortgage brokers think?

The central bank’s latest rise has been met with uncertainty from brokers, with one expert believing the continued hikes are an ineffective strategy to control inflation – and even calling for the Bank of England’s governor to go.

“The whole set up is a shambles”

Samuel Mather-Holgate (pictured), independent financial adviser at Mather and Murray Financial, said the central bank should not have raised rates because it is an ineffective strategy to control inflation on essential items.

“It has failed for the last year and will continue to fail - inflation will drop when price increases are baked in for the year,” he said.

That said, Mather-Holgate believes the bank will raise rates further because they are wed to the idea that doing something shows them as less impotent.

“A rate rise will negatively affect the property market that is already on shaky ground; the whole set up is a shambles and Andrew Bailey, governor of the Bank of England should resign,” Mather-Holgate said.

Impact of base rate rise

Others responded with less vigour but still called the strategy into question.

“Alas, another base rate increase, as getting inflation down is proving a hard nut to crack,” said Graham Cox, founder at Self Employed Mortgage Hub.

He added that lenders are likely to increase mortgage rates, though many had already done so in anticipation.

“Anyone on a tracker rate will see their monthly mortgage payments increase; and of course, anyone looking to purchase or remortgage will be looking at higher rates, though most banks and building societies are doing their best to hold rates down, for fear of business drying up,” Cox said.

Lewis Shaw, owner and mortgage broker at Riverside Mortgages, said he was unsurprised at the latest rate hike, given the central bank had consistently increased by the same margin recently.

“The knock-on effect will be that anyone with a Bank of England tracker mortgage will see their mortgage payments increase from next month, and many mortgage holders sat on their lender’s SVR may see a rise too,” he said.

While fixed-rate mortgage pricing is determined predominately by SONIA swaps, Shaw said the continued increase in the base rate, like a rising tide, will begin to raise all boats.

“Let us hope that we start to see some positive news such as inflation falling, otherwise the base rate could remain higher and for longer than anyone of us would like,” he said.

Amit Patel, adviser at Trinity Finance, agreed with Shaw that the latest increase to the base rate was not a surprise – but the impact is still meaningful.

“This will hurt borrowers who are on a tracker rate and those who are on the lender’s SVR,” Patel said.

He believes it will have a big impact on mortgage prisoners and those trapped in products sold before the 2007-08 financial crisis. Patel added that it will also push many homeowners over the edge and into mortgage arrears, through no fault of their own.

“The MPC needs to get a grip and do the right thing and keep rates on hold, but sadly I cannot see it happening,” he said.

Treading carefully

Andrew Montlake, managing director at Coreco, said while it was expected for the central bank to increase the base rate, he believes it must tread a careful path going forward.

While the markets look to have already priced in another quarter-point rise, Montlake said the danger is that the bank will once again go that step too far and cause more issues than they are able to solve.

“I hope that the rise will now be the last and a period of calm ensues to enable all the recent rises to filter through and take effect,” he said.

Do you believe the Bank of England’s latest hike to interest rates is a positive or a negative for the market? Let us know in the comment section below.