The increase was widely expected across the financial industry and is the fifth rate rise in a year.
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Ray Boulger, senior technical manager for John Charcol, commented: “It would have perhaps been more logical to wait at least for the next Quarterly Inflation Report in August, as much of the impact of the previous rise in Base Rate to 5.50 per cent only two months ago is still to become obvious.
“May’s mortgage lending figures showed an ongoing slowdown – even before the effect of May’s Base Rate rise comes through – and the pain from a full 1 per cent rise over the last 10 months is still to impact on most borrowers with a fixed rate mortgage.”
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Andrew Frankish, managing director at Mortgage Talk, said: “The Bank is caught between two opposing forces. Property prices have risen well above the rate of inflation for the past few years, experiencing double-digit growth in many regions, while businesses are starting to worry about the cost of borrowing and the strength of the pound against other currencies, making our exports uncompetitive.
“This polarity between two opposite market trends means that the Bank has to tread carefully if it is not to upset the long-term economic growth we have enjoyed for the past 10 years or so.”
The Council of Mortgage Lenders’ director-general, Michael Coogan, added: “With increasing concern that the Bank of England will not meet its 2 per cent target for inflation, the rate change will contribute to a gradual slow down in the housing market and help offset growth in other parts of the economy.”
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Jonathan Cornell, technical director at Hamptons International Mortgages, said: “The MPC’s decision will feel like another nail in the coffin for many borrowers. However, with over half of City analysts predicting that the Base Rate will reach 6 per cent by the year end it seems further misery for borrowers is yet to come.”
