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The Bank of England has this lunchtime raised its base rate by 0.5% as the venerable institution fights to bring down inflation, which yesterday was revealed to be sticking stubbornly at 8.7%, way above the bank’s target of 2%.
Commentators and mortgage holders alike had hoped that any rise would be limited to a quarter percent rise, but a majority of the BoE’s Monetary Policy Committee (MPC) believe stronger measures are required to bring down ‘core inflation’.
“The MPC’s remit is clear that the inflation target applies at all times, reflecting the primacy of price stability in the UK monetary policy framework,” it says in justification.
The move is likely – but not guaranteed – to push up interest rates for new landlord mortgages for buy to let properties, and make it more painful for those who are about to come off low fixed rates agreed two or five years ago when interest rates were much lower.
Seven members of the MPC including Governor Andrew Bailey voted to increase the base rate while two said they’d prefer to keep it at 4.5%.
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Alex Lyle (pictured) director of Richmond estate agency Antony Roberts, says: ‘Yet another interest rate rise, coming on the back of so many and with the potential for more to come, creates further uncertainty, which is not good for the housing market.
“Although some parts of the country have proven remarkably resilient to increasing interest rates, inevitably this is less the case the higher they go.
“This latest rate rise will give those buyers who were anxious anyway an excuse to back out. Quite a few buyers and sellers are sitting tight until the autumn in the hope that the situation will have settled down by then.”
Read the MPC decision in full.
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