The Bank of England’s monetary policy committee has held base rate at 5.25% for the sixth time in a row.
The news was widely expected, although some agency industry figures held out a distant hope that rate cuts may begin this month, despite the headline rate of inflation running at 3.2%, so well above the government target of 2%.
Emma Wall, head of investment research and analysis at Hargreaves Lansdown, says Bank of England governor Andrew Bailey had not given any "forward guidance" on a change, which would be expected if he felt a drop was on the cards.
But she adds that “rate cuts will be coming in the UK, and in Europe, within the next couple of months" with yesterday’s surprise move by the Swedish national bank to cut rates an indication of what is to come in this country in June and beyond.
According to Rightmove, the average five-year fixed mortgage rate is now above 5% for the first time since January, while average two-year fixed mortgage rate currently stands at 5.41%, up from 4.84% a year ago.
A spokesperson for independent mortgage broker John Charcol says: “Until a reduction in the bank rate occurs, there will be a period of uncertainty that prompts markets to speculate and continually adjust their forecasts. This situation is expected to lead to an ongoing phase of repricing by lenders.
“Lenders are continually adjusting their profitability margins in response to changes in funding lines and shifts in market competition. This adjustment process is a direct reaction to the uncertain financial environment, as lenders strive to maintain their competitive edge while managing their financial risks.
“Swaps have reduced slightly in recent days as markets price in a rate reduction, which should pave the way for lenders to reprice marginal decreases over the next fortnight.”
Want to comment on this story? Our focus is on providing a platform for you to share your insights and views and we welcome contributions.
If any post is considered to victimise, harass, degrade or intimidate an individual or group of individuals, then the post may be deleted and the individual immediately banned from posting in future.
Please help us by reporting comments you consider to be unduly offensive so we can review and take action if necessary. Thank you.
.jpg)
Join the conversation
Jump to latest comment and add your reply
I am sick and tired of Bailey and his civil service drones destroying the economy!
Can't they understand that you can't fight externally generated cost-push inflation by jacking up the interest rates? People complain about the rising price of food but if a pint of milk had risen by the same rate as the cost of borrowing a pint would cost well over £50!
Also, the idiots do not realise that it's only a section of the population that they are hitting - those not in long-term fixed rate mortgages and renters whose landlords decided to raise the rent to pay Bailey's stupid rate rises! People who are mortgage-free or are council tenants remain unaffected by these pointless rate rises.
I agree 100% Malcolm. Im convinced theres another agenda going on here. Somethings not right.
Bailey has not raised the rates he is simply having to catch up with raising them many months later than he should have done. Don't expect to see a decrease before November you guys had near zero rates for far too long.
This is probably because our debt hits the highest record since WWII due to Covid and furlough. The BOE committee followed the federal reserve interest rate. Many of the committee are from Harvard, IMF, OECD economists and tend to lean on American economics, FTSE and NasDaq are interconnected. Look at their algorithms, they couldn't care less about how much is the mortgage increase people have to bear. They have no sympathy on the common folk but they are all highly paid by the tax payers to attend meeting as consultants. We need to improve economy, to be more independent to have our own views and policy in governing our country. They were late by a year to increase interest rate and allow inflation to kick in. We are paying the price for their incompetence.
The problem is they're hitting the wrong people.
The Covid furlough and freebies were largely unnecessary and poorly targeted. The people being most heavily hit with high interest rates and punitive taxation are the people who got NOTHING while everyone else was sat at home.
As a landlord I didn't expect much support from this anti aspiration government but equally I didn't expect them to tell my tenants to go and squeeze back into their parents house and that they could request a rent holiday. Fortunately none of mine actually did but it left me feeling incredibly financially vulnerable. To the point that I increased the hours I worked in my zero hours job (alternative to a gym membership). As an essential worker I wasn't entitled to any furlough money and parcels get sorted in a warehouse, not your living room. So I spent 2 years working full time with people who didn't understand the basic concept of social distancing. Not only that I also had to do a lot of the jobs around the houses I would normally pay tradespeople to do because tradespeople could claim furlough money to sit at home.
Now I have sky high mortgage payments and a sky high tax bill, mainly because of the way Section 24 works with sky high mortgage payments.
I'm fully aware interest rates aren't especially high on a historic basis but previously house prices were much, much lower. Also fewer people had 5 year fixed mortgages so interests rate movements filtered through into the general economy much quicker. Now it's pure luck when your fix ends and what products are available at that point.
My husband is also an essential worker (HGV driver). He needed a knee replacement operation about 2 weeks before the first lockdown. The agency he worked through weren't allowed to furlough him while he convalesced so he was only entitled to about £96 a week SSP. As lockdown rules prevented in person physiotherapy his recovery took longer than it should have. The minute he could physically climb back in a lorry cab he went back to work to deliver the online purchases people were buying with their furlough money.
Now his tax bill is nearly as horrific as mine, mainly because of the impact of Section 24 and sky high mortgage interest payments.
Totally agree. If rates needed to go up, it should have been done more gradually. Just off to take some carpets to the tip, empty house going on the market next week, hey ho.
Raising rates makes sterling stronger (or at least, prevent its depreciation). This helps to fight against inflation.
Rates were left far too low for far too long
It is futile analysing interest rates in isolation. You have to also consider house prices relative to wages.
In the early 90's when rates were 15%, house prices were typically 4-5 times average wages. Now, where house prices are typically 10-15 times average wages, you have to have interest rates of 2-3% to keep the illusion going. Any more than that and it will hurt.
The current situation will lead to house price reductions, huge wage growth, lower interest rates again or mass defaults. Take your pick.
Wages are a real problem in the UK. A recent "Head of Cyber" role in Government was advertised paying around £50k. A manager in a fast food outlet in America typically earns around $100k. Wages have been suppressed hugely here as we have been addicted to mass immigration (aka cheap labour). And we all know that if you pay peanuts, you get monkeys.... Explains a lot!
Inflation has come down because the prevailing external pressures eased not because of the incompetent BoE. They now fee obliged to keep the rates higher because they were so slow in raising in the first. Inflation wouldn't change now if they bright the rates down to 4%
Great news for new recent landlords who can sell anytime unlike long term traditional landlords who are locked in with C/ gains tax, held to ransom and can’t sell because of removal of indexation relief.
Otherwise recent landlords say the last 10 / 15 years can make a killing seen the value of their property increase while borrowing money for 1%, now can sell put their money on base rate tracker of 5% a quarter % below base rate of 5.25% happy days do nothing let the Activists take a run & jump and the Councils get on with their HMO’s and the Homeless enjoy their tents.
In answer to all replies I would say the following.
Yes, as one or two people have said, interest rates were kept far too low for far too long and that was also down to the incompetent Bailey & The MPC. While rates were so low, asset prices soared and people were forced to borrow huge amounts just to get on the housing ladder. Then the idiots panicked and raised the rates to 52.5 times as much as they were in December 2021. Remember that if pint of beer had increased in price by the same rate as the BOE interest rate it would cost now about £187.00 - a sobering thought.
Please login to comment