Dealing With Interest Rate Increases

Interest rates have reached the highest level in 14 years as the Bank of England increased interest rates for the ninth consecutive time. This sees interest rates standing at 3.5%.

This increase is likely to have a significant impact on mortgages, which means the housing market will be impacted. There will also be an impact on existing homeowners, with homeowners on a variable rate mortgage likely to pay more each month.

This latest increase means people who have a typical tracker mortgage are likely to pay an additional £49 a month, while homeowners who hold a standard variable rate mortgage will likely face an additional £31 a month in their mortgage payments.

Further increases might occur

The Bank of England’s Monetary Policy Committee voted 6-3 in favour of putting rates up by 0.5%. The committee stated that more increases in bank rate might have to happen to tackle concerns about ‘personal domestic inflationary pressures from prices and wages’.

The Bank released a statement saying; “The labour market remains tight and there has been evidence of inflationary pressures in domestic prices and wages that could indicate greater persistence and thus justifies a further forceful monetary policy response.”

Jeremy Hunt spoke about the latest interest rate increase, saying; “High inflation, exacerbated by Putin’s war in Ukraine, continues to plague countries across the world, eating into people’s pay cheques and driving up food and energy prices. I know this is tough for people right now, but it is vital that we stick to our plan, working in lockstep with the Bank of England as they take action to return inflation to target. The sooner we grip inflation the better. Any action which risks permanently embedding high prices into our economy will only prolong the pain for everyone, stunting any prospect of economic recovery.”

Before the announcement, Martin Lewis said on ITV’s Good Morning Britain: “Anybody coming off a cheap fix at the moment will likely be paying around 3% more than they were paying previously. That percentage rise equates to £160 more per month per £100,000 of mortgage.”

Victor Trokoudes, co-founder and chief executive of the savings and investment app, Plum, talked about this matter, saying; “Today’s base rate increase of 50 bps comes as no surprise. The UK appears to be aligning itself to the interest rate trajectory of the USA. However, there are potentially dangers with this approach as there is less evidence that the Bank of England is beginning to win the battle against inflation compared to the Federal Reserve. Yes, inflation came down in the latest reading but it still remains at historically high levels in the UK. Let’s hope the peak is now.”

We know many people are re-evaluating their next move in the housing market, but we are here to assist you at all times.

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