The Bank of England has announced its latest decision on base rate.
This has been increased by 0.25 per cent to 4.5 per cent. It’s the 12th successive increase, taking it to the highest level since 2008.
Angus Stewart, chief executive of online buy to let brokerage Property Master, says: “This continued increase in base rate will reflect in higher interest rates for those BTL borrowers on tracker or discounted rate products or who remain on the lenders’ SVR. If you’re on the SVR and not planning on selling your property in the near future it might be worth looking at fixed or tracker products to mitigate the increased mortgage cost.
“We continue to see increasing competition between lenders and the margin between fixed and variable rate products has reduced considerably in the past few months. The key challenge for many landlords is meeting the affordability requirements for a new mortgage especially in areas, such as London and the South East, where rental yields are lower.”
Marylen Edwards, head of buy to let lending at property lender MT Finance, comments: “Considering recent events in the global financial markets, this latest rate rise was not unexpected. While a reduction in base rate would have been welcome news, it feels as though another increase is necessary at this moment in time to combat stubbornly high inflation and help bring back some much-needed stability. Hopefully this will be the last rise before we start to see a plateau.”
Jonathan Rolande, spokesman for the National Association of Property Buyers, adds: “The rise today is very disappointing. The Bank of England has very limited tools to combat the inflation that is making life so difficult, raising interest rates is one of them.
“Housing costs such as mortgages and rents have rocketed in the last two years – up 26 per cent on average. The rise in rates may help to control these increases eventually but in the short term, it will cause more misery to millions of homeowners and tenants, who often see rents rise in line with the cost of their landlord’s mortgage.
“This is the 12th increase in a row and is one that could potentially snuff out the mini-recovery that has begun this spring. We must hope there isn't a 13th.”
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This will keep going up until at least the year end…. I see trouble coming from those on cheap fixed rates ending this year 🆘🆘
Interest rates are used to control inflation which is out of control, as is most things with this government. They will keep going up. Unfortunately most people are hooked on cheap money and are willing rates to go down, no chance.
The reason people are dependent on cheap money is because they are forced to be because their basic living costs outweigh their incomes ad they have done since 2007/8.
Despite government lies we have not recovered from this crash.
Now this criminally corrupt government, started by the Twerp Truss, is weaponising inflation even more against the people which it will reduce to serfs with no right to demonstrate or protest the continuing deteriorating conditions.
What would the French do Suzy ? I can see the people of this country doing just as they would, it'll be a big problem for labour when this all kicks off
Andrew
The French tend to surrender when faced with superior forces, wait on the rest of their Allies to bail them out and then stab these Allies in the back whilst cosying up to the former enemy.
The British keep going until they win - just a pity we're no longer in total control of our own country with many enemies within!
Agree to a certain extent but rampant inflation is a result of the uncertainty, Ukraine situation especially. The markets have priced this in now which has slowed the pace of inflation, the US which is dropping quite nicely will lead the rest to do the same. Hopefully this is the last one for a while and in the meantime the resolution of the war will help further.
To be fair I am an optimist..!
I still struggle to understand what effect raising interest rates has actually had/is having or will have on inflation, when it’s mainly down to the War in Ukraine, energy prices and food prices. Maybe I’m thick, but how can raising interest rates affect these situations? The war….. no! Energy prices…….no. Food prices……obviously people need to eat.
I agree with you. Makes no sense to me.
Shell announced£7.6bn profits for the first quarter!
Food prices, utility prices and pretty much everything you can think of has risen (often needlessly)
... but yeah, lets chuck interest rates up again, that will slow inflation.
Curbing inflation by raising intetest rates only works when you have a booming economy. In the depression we are in it will just depress the economy further, which may affect inflation, but by then the patient may be beyond cure.
Raising interest rates reduces demand and therefore causes prices to fall. Obviously it creates a recession. Reasons for inflation are, pumping billions of money into the country during covid. Giving the EU lots of money and our natural resources such as fish, worth over £4 billion. Leaving Britain's massive hydrocarbon resources in the ground (net zero !). Massive immigration. 9 million people classified as NEET, in reality unemployed. Destruction of Britains industrial base. Net zero will turn indigenous Brits into paupers, but it gives the ultra rich enormous power
The basic premise of interest rate hikes as a method to curb inflation is a one dimensional approach to financial control.
Fundamentally it has a major flaw if its the only method used (which unfortunately it seems to be) as it’s based on the assumption that consumers excessive spending as opposed to being attracted to save, is what is driving prices up. I don’t think anyone believes that the average consumer is on a spending spree that is forcing prices up due to excessive demand effects. Ironically raising interest rates which therefore increases mortgage payments compounds real inflation to the consumer. This isn’t reflected though with the banks calculation of inflation as they use CPI to measure it and not RPI (RPI includes mortgage interest payments, CPI doesn’t).
So logically how does an interest rate increase help?
It actually compounds the issue further. In this situation the causes of inflation are multiple but not remotely linked to excessive consumer spending.
Interest rate rises will do nothing more than force further hardship on the economy. Landlords and home owners and then ultimately renters will all feel the effects further as landlords mortgage payments will reach levels where if they don’t adjust rents upwards, will be forced to sell up or lose money every month until they themselves cannot pay their own bills. High interest rates curb investment too. All property development becomes further less viable than before. In fact all businesses that require financing to invest and expand will find things tougher. Definition of madness is doing what you’ve always done before and expecting a different result. ‘Nuff said’.
John. I am another thicko don’t understand it either, increasing interest rates drives up prices, Rents & Mortgage’s how does that control inflation or control the economy just collapses it as
many times before.
Well- was expected. More PLL sell up. So pushing rents up. Even higher- As and when.
I too have never understood how raising interest rates curbs inflation when huge increases in utility costs, food prices, petrol and virtually everything else is already curbing expenditure. It is just piling more misery on the rank and file. High bank interest rates help the £ on the money market so that’s probably the real reason.
This is the end of boom and bust
BOOOOOOOMMMMMMM!!!
Increasing interest rates is a myth. The message to everyone is to stop spending so prices can come down. It seems there is no linkage between interest rates and war Ukraine or energy and food prices. Government should address those three key areas with strategies to bring these prices down. The Chancellor and the Treasury and BOE should get their act together instead of sitting in meetings looking at algorithms. Why is it every time the FED increases its rates, BOE will follow? It happened every single time, do we have too much of the influence from MIT, Harvard and Stanford? and how is their country doing ? The price of butter has gone up to 36%, the milk increased 71% as per government statistics.
Interest rates do follow each other. Or else there would be another devaluation of the pound.
Now I can remember Wilson coming on a news flash in the 60s when he devalued the pound and saying ''it will not effect the pound in your pocket'' even then as a young school boy I knew he was talking total bull s@@t
Higher interest rates creates homeless by making property unaffordable, prevents purchases and investment.
Regulation’s and licensing Schemes creates homelessness, driving up costs and driving landlords out of business or causing them to switch to AirBnB.
Reducing supply for Regular Lettings. Licensing also reducing supply I have a 2 double bed garden Flat was licensed for 4 twice but when one left the 3 wanted it on their own, now down to 2 which doesn’t require a license, so I will leave it like that with just 2 it a bit less Rent but the cost of licensing and other associated costs makes it not worth while, so more housing lost.
Edwin, don’t get it, reducing demand you create unemployment, it don’t lower prices, its other way around if you sell more of something you can sell cheaper / scale of economics.
When you sell less you are reducing the profit and tax take plus loss of vat. I can see many other issues here.
Michael you are correct. As Dennis Healey said to the Tories(Thatcher) et al., you don't get inflation in a graveyard ! Thatcher, it is now admitted, used north sea oil to cope "with the social consequences".of destroying British Industry. Basically unemployment she created is still here and disguised as NEET, not in employment, education or training.
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