Base Rate Increase
The Bank of England (BoE) has increased the base rate level of interest to 5.25%, the 14th consecutive increase. The Monetary Policy Committee voted by a majority of 6 to 3 to increase the base rate from 5.0% to 5.25%, in line with market expectations in the lead up to the vote, albeit some market participators expected a 0.50% increase. This is the highest base rate has been since 2008.
Andrew Bailey, Governor of the Bank of England has said that increases in the base rate level of interest will help to bring down inflation, however others have concerns that Britain could be pushed into a recession if interest rates increase further.
What Does This Mean?
Rising interest rates mean bigger borrowing costs – including larger monthly mortgage payments for many homeowners, which can have a knock-on effect of higher rents for tenants. This change will likely result in an increase in mortgage payments for millions of borrowers on variable rate mortgages as lenders react to the announcement. Those on fixed rate mortgages will be unaffected at this time, with payments remaining the same until their deal ends, however they may see an increase in their repayments when it comes to finding a new deal in the future.
What The Bank Said
- Inflation is falling but it is still too high
- Interest rates have been increased to make sure inflation keeps on falling and stays low
- Inflation is expected to fall markedly further this year, and meet the 2% target by early 2025