There’s widespread speculation that the Bank of England’s Monetary Policy Committee will today announce another interest rate rise – and it will be a big one.

Some commentators expect a 0.5 per cent rise but some are predicting a 0.75 per cent increase, along the lines of that recently announced in the United States.

Mortgage brokers have been given their views on what this means for the housing market.

“As rates rise, the major area of concern is people approaching the end of their initial two, three or five-year fixed rates. In many instances, these initial deals will have been secured at rates well under 2.0 per cent but the people in questions will find they are switched onto a new rate of more than twice that. In practical terms, for every £100k this is likely to equate to an average increase in monthly payments of approximately £150. This significant increase, along with the general cost of living crisis, is now reaching a point where some people may have to start contemplating the viability of maintaining their mortgage and whether selling up is a prospect that needs to be seriously considered” cautions Ross McMillan of Blue Fish Mortgage Solutions. 

Ross Boyd, founder of mortgage comparison platform Dashly says: “A rate increase of 0.75 per cent will send shockwaves through the property market. Yes, rates will still be low compared to their historical average but a huge amount of homeowners and buyers have never known rates this high. Factor in the impact of skyrocketing inflation and an economy that’s teetering on the edge, and you have all the ingredients for a serious slowdown in transaction levels.”

And Anil Mistry, director at RNR Mortgage Solutions, comments: “Younger borrowers age 35 and below will be feeling the impact of rising rates the most, as many of them will have never experienced rate rises like this and for the base rate to be climbing to these levels. The Global Financial Crisis created an artificial rate environment that has lasted for almost a decade and a half, and we may now be exiting it. Many borrowers and homeowners are going to be brought back down to earth with a thud. Borrowers who may have fixed in recent years, possibly on rates of 2.0 per cent and under, can now expect fixed rate products to be in the high threes or to even start with a four.”

“Even if rates rise to 2.5 per cent and beyond, for many it will still be cheaper to own than to rent. There is talk that prices will fall as rates rise, but I think this is unlikely, unless the economy enters a deep and protracted recession. We are more likely to see the rate of price growth fall, and perhaps even flatline, during the year ahead. As ever, the lack of supply will act as a glass floor under the property market” suggests Andrew Montlake, managing director of Coreco.

Lewis Shaw, founder of Shaw Financial Services, sees it like this: “The Bank of England are damned if they do and damned if they don’t. If they fail to contain inflation, politicians will argue that they’re not fulfilling their mandate of keeping inflation low and stable. However, raising interest rates will further exacerbate the cost of living crisis as it will inevitably push up mortgage rates, reducing people’s disposable income. Over the past fortnight, we’ve seen many lenders increasing rates in preparation for further base rate hikes, which will likely continue for the foreseeable future.”

Harmony Financial Services’ director Imran Hussain says: “One thing it won’t do is deter serious first-time buyers or investors as in every market there is an opportunity. As most people now know what their energy bills will be for the next 24 months, confidence is ironically stronger compared to the past three months in the conversations I’m having with clients. Until a fortnight or so ago, energy bills were an unknown and the end of that uncertainty has boosted confidence. I can see lenders reacting quickly no matter the outcome of the Bank of England’s decision. We should brace ourselves for a flurry of rate changes at very short notice later this week and early next.”