Commenting on the decision, Matthew Wyles, group developmentdirector at Portman Building Society, said: “This rate increase was a racing certainty and has already been factored into the pricing of most fixed rate mortgage products. It is clear that the MPC intends to ratchet rates upwards until our exuberant housing market loses some of its momentum. The impact of this strategy on less resilient sectors of the economy will be considerable.”
Philip Davies, chief executive of Linden Homes, added: "Today's interest rate rise was widely expected and the majority of homeowners had already priced it in, so I do not expect it to have a significant impact on the housing market.
"A further rise in December or January, however, would have a detrimental effect on consumer confidence, so I await the minutes of today's MPC meeting with anticipation to see how the committee members voted.
"Investor presence is currently strong and first time buyers are clinging on to the market through developer deals, buying together and with financial help from their families, but they will feel the pinch even harder after today's rise. The continuation of the upward trend next month or in the new year would price the vast majority of first time buyers out of the market altogether, resulting in stagnation and preventing existing homeowners from moving up the ladder."
Colin Bell, operations director at InterBay, said: "A rise has been widely anticipated in the commercial market and so today’s news comes as no great surprise. An increase in inflation above target and a property market that shows no signs of weakening are just two of the factors which strengthened the argument for an increase in interest rates. Following a lull in consumer spending in August this year, confidence has also now gone up and spending has followed suit.”
Bell continued: “The rise from 4.75 to 5% will clearly have an effect on all borrowers on variable mortgages. Those most at risk are first time buyers – of commercial and residential property alike – especially those who have taken on those mortgages available at ever increasing income multiples. Borrowers who are already stretched must take action to ensure that they can keep up repayments.”
