Bank rate rises to 0.5%: More hikes likely as four MPC members vote for bigger hike

“The rise will be an early warning to UK households of further increases to come, which will consequently mean higher mortgage costs.”

MPC minutes show that members of the minority preferred to raise the bank rate by 0.5 percentage points, to 0.75%.

The widely anticipated hike follows a rise in the Bank Rate from 0.1% to 0.25% at the last MPC meeting in December.

The Committee’s updated central projections now show that the Bank Rate will rise to around 1.5% by mid-2023.

During its meeting, the MPC noted that the economic impact of the Omicron variant is “likely limited and short-lived”, and that UK GDP is expected to recover in February and March, returning to its pre-pandemic level of here the end of Q1.

CPI inflation rose by 5.4% in the 12 months to December 2021, the biggest rise since 1992, according to ONS statistics.

Inflation is expected to increase further in the coming months, reaching almost 6% in February and March, before peaking at around 7.25% in April. Inflation’s expected overshoot of the 2% target mainly reflects global energy and tradable goods prices.

The MPC predicts that, if the economy develops broadly in line with its projections, “further modest monetary policy tightening is likely to be appropriate in the months ahead.”

Joshua Elash, Director of MT Finance, said: “This rate hike is absolutely necessary as a first step towards easing inflation, which has already started to impact the wider economy.

“The rise will be an early warning to UK households of further increases to come, which will consequently mean higher mortgage costs.

“That said, borrowers need not panic just yet. We don’t expect this rate hike to have a significant impact on prices in the current mortgage market, as it follows significant moves previous SONIAs (sterling overnight interbank average rate), which have therefore been absorbed by an industry that abounds in cash.”

Richard Pike, Director of Sales and Marketing at Phoebus Software, continued: “The interest rate hike by the Bank of England today comes as no surprise to anyone given soaring inflation. However, the fact that the vote was so close and those of the minority wanted to increase to 0.75% is telling for the next meeting.If the Bank starts raising rates in increments of 0.5%, it won’t be long before the increase has a marked effect on mortgage interest rates.

“The cost of living is rising and with gas and electricity prices set to rise further, this could be a difficult year for many. finances will likely be revealing over the next few months.Lenders need to focus on arrears and collections and ensure they are working within “TCF” guidelines and within approved forbearance parameters.Some households will already have trouble and lenders should look ahead and make sure they communicate with their borrowers before things get too bad.

Rod Lockhart, CEO of LendInvest, commented: “The Bank of England is caught between a rock and a hard place – rates need to rise to control inflation, but the steadily rising cost of living casts a dark shadow. On a more positive note, we don’t We do not expect to see a correction in house prices as supply and demand imbalances only add to the upside risks We also expect mortgage rates to remain competitive as lenders continue to protect or attract market share.”

Miranda Khadr, Founder and CEO of Pitch 4 Finance, said: “I think it is irresponsible for the Monetary Policy Committee to raise the base rate this month, despite rising inflation.

“The cost of basic daily needs such as food, gas and electricity has risen and more and more people are struggling to get by. There are too many things happening at the same time for rates to rise now. If you add tax hikes that are due soon and higher interest rates, people’s finances will suffer even more.

“Not everyone is protected by a fixed rate, especially those with commercial mortgages. that the addition of higher mortgage payments will hit them hard.This will cause house prices to rise and push more first-time buyers and upsizers out of the market.

“Rising debt is also a concern, with Bank of England data released this week showing that annual credit card debt increased by 2% in December. Other forms of consumer credit such as credit auto and personal increased by 1.1% The increase in interest rates will only add to this.

Paul McGerrigan, CEO of, added: “In my opinion, a rise now, so close to that of December, is absolutely not the right time.

“Yes, inflation has risen sharply and is at its highest level in 30 years, but driven by largely uncontrollable factors – an economy recovering from the Covid pandemic leading to a surge in demand and a crisis in energy supply.

“The bank must accept that there is no silver bullet to controlling inflation at times like these – rising interest rates will now hit consumers, especially low-income ones, at worst possible time – with an increase in the energy cap of 54% and an increase of £12 billion. – an annual package of tax increases to come in April.

“It’s a mistake, and consumers will have to pay at a time when they can’t afford it.”

Lucian Cook, Head of Residential Research at Savills, said: “It will put some pressure on household finances and affordability. However, some of the underlying economics of the housing market remain unresolved: it is currently less about affordability and more about supply and demand, and the extreme shortage of inventory and high levels of demand will likely support a further growth in house prices, especially given the high levels of equity in the market.

“Today’s rise will be a signal to homebuyers that rates will inevitably rise and this may now happen sooner than expected. Whether or not the Bank of England will ease mortgage regulations is now a more pressing question for highly leveraged buyers.

“The mortgage market remains highly competitive and lender margins have tightened during the pandemic. Thus, we could see today’s rate hike fully passed on to borrowers.

“We are maintaining our forecast of 3.5% average house price growth in the UK this year, probably weighted towards the first half of the year.”

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