Bank of England raises rates to 5.25%

Thursday's 0.25% increase in the base rate from the Bank of England was widely expected given inflation is still far above the government target of 2%, and following the US federal reserve recently increasing their rate despite much lower inflation. Fixed mortgage rates have already priced this increase in so there should not be any lender rate increases and these may even continue to reduce slightly as lenders feel the base rate is close to peaking. Sadly, the positive news on inflation recently has been mainly due to agriculture and fuel and is not down to the Bank of England and their constant hiking of the base rate. So I do not expect today's increase to help at all with inflation. The voting numbers show we should expect another increase next month with confidence.

Increasing rates, knowing the last rises haven't been felt yet, and whilst inflation is falling, is absolute lunacy. Only one member of the MPC wanted to maintain its previous level and they should be applauded. This further rise will add misery to homeowners and those with business finance. An already lifeless housing market will shrink further into itself, not to reappear until Spring. The Governor needs to get a grip and reverse these hikes before the end of the year. Thankfully, the next inflation print might just give him the impetus to pause and reflect on his insane mission to bash borrowers.

This latest increase was pointless and ill-thought-out. The MPC is just using the same tool that hasn't worked the last 13 times they used it and won't have any effect this time either. The only people this is going to affect are those on tracker mortgages, it won't have any impact on fixed rates at all as this increase is already factored into current offerings. The more important date for mortgage rates is the 16th of August with the release of the inflation data.

This is no longer a shock any more and I think it is all starting to become a 'no-news' item for most people, who are becoming numb to it. The decision to raise again without seeing what the impact of the constant rate rises to date has been, is just puzzling now. It will be interesting to see what happens with the inflation figures on 16th August.

The rate hike was anticipated, yet two members advocated for a more assertive approach, proposing a 0.5% increase. Given that there are three more rate decisions slated for the remainder of the year, we can likely expect additional hikes. The fresh forecast projects that CPI inflation will resume its 2% target by the second quarter of 2025, which is a more extended timeline than initially projected. The forthcoming batch of inflation data, scheduled for release on the 16th, will provide some insight into the likely economic trends for the rest of the year.

It's unfortunate that Dr. Bernanke's evaluation of the Bank of England's forecasting concludes only next year, with the results to be disclosed in the spring. Given 14 consecutive rate hikes and yet inflation remaining unmanaged, my trust in the Bank's strategies has hit a historical low.

Another month and yet another rise from the Bank of England, which seems hell-bent on inflicting further misery on mortgage holders and those with aspirations to buy. This further rise seems an unnecessary step too far, and we can only hope that the Bank now sees sense and pauses for breath as this, and previous rises, finally work themselves through the economy, before they cause any lasting damage. The good news is that SWAP rates have eased recently on the expectation that we are now very near or at the peak of the current rate cycle, and although tracker mortgages will increase on the back of today's decision, we may well see fixed rates continue to ease slightly, especially as lenders look to get a better start to next year. The next inflation report and subsequent words and actions from the Bank of England are crucial to us all. We know taming inflation is imperative, but to every action there is a reaction further down the line.