Interest Rates: Bank of England announces latest decision

The Bank of England has increased base rate to 4.0 per cent - its 10th rate rise in a row.

Nathan Emerson, chief executive of Propertymark, says:  “We of course are seeing challenges within the market as the cost of people’s mortgage payments are in some cases a lot higher than they have been traditionally used to. However, due to the demand for homes continuing to outweigh the number of properties available, this is fuelling a more stable market. With Banks stress testing people’s finances for many years, arrears and repossessions aren’t drastically increasing and we are therefore seeing a levelling out of the market and a return to more normal levels of housing transactions.”

Rightmove’s property expert Tim Bannister comments: “Today’s 0.5 per cent rise in the Bank of England base rate is another cost that homeowners on a tracker mortgage will need to factor into their monthly budgets when the full rate rise is passed on. It’s likely that many of those on a tracker mortgage will still be on a lower rate than most current fixed-deals even with this increase, so we’re unlikely to see any rush to fix from this group just yet, although with the gap between tracker and fixed rates narrowing it may prompt more people to see what’s on offer in the coming weeks.

“For those considering taking out a fixed mortgage deal soon, the good news is that this increase was widely expected by the financial markets and will have likely been factored into plans. This means that we may see fixed-rate mortgage deals continue to edge downwards in the first half of this year, as some stability and calm continues to return to the markets. We’re still seeing buyer demand higher than the last normal housing market of 2019, indicating that people have the confidence to get on with their moves and if fixed deals do head further downwards this may encourage people further. We may see further increases in the base rate later this year but it’s difficult to predict how it will impact mortgage rates.”

Jeremy Leaf, north London estate agent and a former RICS residential chairman, comments: "The effects of the Bank of England’s base rate decision have seemingly been discounted by many homebuyers and sellers who are on fixed-rate deals which don’t expire for some time yet. But don’t get me wrong, those directly impacted by the change will know all about it in their repayments. The impact on house prices has been a reminder that negotiations can be tough if transactions are to happen as prospects are not exactly rosy. While another base-rate rise is unwelcome, more attention is being focused on two- and five-year fixed-rate mortgages, which thankfully have started to fall. This will bring much-needed stability and confidence to take on debt, despite continuing worries about the economy."

According to the Nationwide, the UK housing market is now in its longest slide since 2008, with the UK average house price slipping again last month to leave prices almost unchanged over the last year as a whole. Mortgage rates have eased in recent weeks after surging following the now-infamous mini-budget. But affordability remains stretched according to Nationwide chief economist Robert Gardner: he says that current mortgage rates leave the cost of servicing a typical mortgage as a share of take-home pay at or above the long-term average in all regions of the country.