Another base rate rise, but is it already “priced-in” by lenders?

The Bank of England Monetary Policy Committee today implemented a ninth consecutive base rate increase, rising interest rates by 0.5%. to 3.5%. Consequently, the base rate is now at the highest it has been for 14 years.

A six week interlude since the last meeting had taken some of the heat out of the interest rate debate. When the Bank last met in early November, it was under intense pressure to restore confidence in the UK’s economic management after the ill fated “mini-budget” and subsequent unravelling of the Truss government.

As a result, it increased rates by 0.75% to 3%, the increase was the biggest single day increase in more than 30 years.

Recession + inflation = rate rises

Financial markets had predicted today’s 0.5% increase as fears continue to mount about the UK entering a prolonged recession. The Bank hopes that increasing the costs of borrowing through interest rate hikes will combat inflation. Data released yesterday showed that although the consumer prices index (CPI) fell back from 11.1% in October to 10.7% last month (mainly from weaker increases in petrol, clothing and food) it remains well above the BoE’s 2% target.

Tackling public enemy number one

Jeremy Hunt had previously thrown his support behind the committee at Threadneedle Street by stating his priority was controlling inflation. Hunt stated that inflation was “the number one enemy that makes everyone poorer” and “getting inflation down so people’s wages go further is my top priority”

It has been suggested by some experts that headline inflation may have peaked in October partly thanks to reducing oil costs, stronger currency and companies becoming less confident about further increasing their prices.

Act now or wait?

One thing that is certain, is that no one can predict the markets next move. Borrowers are trapped between acting now to prevent further increases or moving too early and paying over the odds on interest rates.

Have mortgage lenders priced this increase in to their rates?

Andy McBride, Director at Cleerly had this to say about the current situation:

“Whilst I am sure the increasing base rate has many people concerned, it is worth noting that many lenders have already “priced in” rate increases. Whilst there will probably be further jostling on rates from the lenders, I would suggest this has more to do with wholesale borrowing costs and managing their lending targets given the time of year than base rate movements”

What are our experts advising at this time?

Matthew Long Senior Mortgage Consultant says:

“My advice to any contractor whose mortgage is expiring in the next twelve months or looking to move home, is to engage a mortgage consultant as early as possible. Lenders often give you the option to secure rates early. If rates increase you have a rate secured, if they reduce you can simply switch the lower rate prior to you remortgage or house purchase”

We're confident we can help you

If you are looking at a new purchase or to remortgage at the end of your current deal, speak with one of the Cleerly team as soon as possible.

The advice may be to hold tight, but 10 minutes of your time could help form a plan that could save you a lot of money and time in the future.

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