Expert said the BoE's decision "was long anticipated"
The Bank of England (BoE) raised interest rates by 0.5% just moments ago, increasing the current bank base rate from 3.5% to 4%.
The bank rate, which has increased for the 10th consecutive time since mid-December 2021, is now at the highest level it has been since the economy was hit by the 2008 global financial crisis.
The BoE has been trying to control soaring inflation by increasing the cost of borrowing. The UK’s annual inflation rate leapt to a four-decade high of 11.1% in October, but that has eased to 10.5% after two successive months of decline. Still, the figure is still way off the government’s inflation rate target of 2.0%.
“There is no sugar-coating it: it looks like it’s going to be another tough year for the UK economy,” Oliver Rust, head of product at independent inflation data aggregator Truflation, stated. “Inflation looks set to remain high and is unlikely to return to the BoE’s 2% target anytime soon.”
Tessa Skot, chief operating officer at online mortgage broker Better.co.uk, commented that today’s rise in the base rate “was long anticipated” and that they believe that lenders have already priced its effects into their deals.
“Today’s rate rise will add a little to the downward pressure on house prices but, as affordability has been a significant challenge in recent times, this may be good news for buyers in a nervous property market,” she said.
Skot added that they would expect property values to drop between 5% and 8% this year which, given the significant leap in prices over the last couple of years, represents a correction to a buoyant sector.
“For those seeking mortgages or remortgages, we expect prices to continue reducing despite today’s rate rise,” she said. “Not only is there no cause for panic, there’s an opportunity for homeowners to find a better deal by talking to a mortgage broker – get the right deal and you could save hundreds of pounds a month.”
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