Bank of England rate decision

This further increase of 0.5% in the Bank of England base rate to 5% is another serious body blow to UK businesses. It will get passed on in full and immediately to commercial borrowers. Non-bank lenders will see their own funding costs increase, so the end business borrower will see their cost of borrowing increase more than 0.5%. We see many clients using business finance to afford the upfront costs of taking on new work and opportunities. This rate increase will stifle productivity, growth and business confidence, in turn affecting GDP in the wider economy.

This latest hike, without a doubt, could slow down the property market as potential buyers scuttle away. As for savers, they get to do a victory dance. Higher interest rates could mean a little extra cha-ching in their savings accounts. It's like finding a forgotten twenty-pound note in the back pocket of your jeans. Sadly, the value of those extra returns will be overshadowed by inflation. It's like winning a dance competition, only to realize you spent more on sequined costumes than the prize money itself. Investors and the markets are left doing a jittery jive. The rate hike introduces a dose of uncertainty, leaving property investors to ponder whether to tango or tiptoe out of the market.

Considering the hot inflation print yesterday and core inflation hitting its highest level since 1992, it's no surprise to see the Bank of England raise interest rates by 50bps to 5%. Considering that two members voted to keep rates unchanged, there's certainly a glimmer of hope that the BoE won't hike rates to the 6% the market had initially been expecting. This is because some members of the committee are acknowledging the lagged impact of rate hikes on the economy and mortgages. Nonetheless, this will be heavily dependent on wage growth and how quickly lower food and energy costs flow through to retail prices to cool inflation in the coming months.

The mortgage fixed rate markets seem to have already priced this in, so I would not expect any further great changes beyond what we have seen over the last month. Although clearly not welcome for mortgage holders, I believe this was the correct call, as the previous rate changes have had little effect on curbing inflation. The definition of insanity is do the same thing and expect a different outcome. Hopefully this means those in charge may be sane after all.

It seems the Bank's attempt to bring inflation down has taken a hilariously futile turn. It's as if they're playing a game of whack-a-mole, but instead of moles, it's prices that keep popping up everywhere. They swing their mallets with all their might, but each strike only seems to send prices soaring higher. It's like they're using a feather duster to fight a hurricane. Maybe they should try a different approach, like hiring a team of clowns armed with water guns to cool down the overheated economy. It's a comedy of errors that leaves us wondering if the government and Bank of England are secretly moonlighting as a stand-up comedy troupe, because their attempts at tackling inflation are nothing short of a hilarious pun.

The Bank of England seems determined to push us into recession. Small business owners have already had to survive Covid lockdowns, inflation-busting outgoings in the form of suppliers and staff, and a cost-of-living crisis causing customers to drastically reduce spending. This latest rise could well be the final nail in the coffin for many small business owners.

The ticking time bomb has finally exploded with devasting consequences for borrowers, renters, and business owners. By hiking the base rate to the highest level for 15 years, the Bank of England will now effectively force the UK into a recession. The journey ahead looks bleak and it will get much worse before it gets better. Real pay for the majority of people in the country has been flat and, due to the rising cost of living their disposable incomes has significantly reduced so I cannot see them as being responsible for pushing prices up. Fundamentally there are 3 reasons why inflation is stubbornly high: Brexit, profiteering by banks, energy companies and in the food supply chain, and the Bank of England. What we need is the Bank of England to cut interest rates. Clearly the interest rate hikes so far have failed to curb inflation, and are causing real hardship for the citizens of the UK.
Sunak said he wanted to halve inflation by the end of 2023. He only has six months left.

Increasing the interest rate to 5% will mean that mortgage payments will go up hence people will be tightening their belts & buying carefully. This is worrying and hoping that it will not impact small businesses.

My heart sank for the small businesses of the UK when I heard the announcement from the Monetary Policy Committee at midday today. While we expected another rise, it's becoming clear that the Bank of England can no more hold back inflation than King Canute could control the tides. To continue to increase base rates robotically seems like a futile act bordering on self-harm. The traditional economic rules are clear. You counter inflation by raising interest rates. This raises the cost of money, reduces consumer spending power and encourages suppliers to lower the cost of their products. However, it is a blunt instrument and the Bank is overlooking unique factors that mean the traditional rules do not apply. The drivers of inflation (the war in Ukraine, the impact of Brexit and Covid) are beyond the reach of the tools it has at its disposal. Raising interest rates in the UK will not cut the cost of fossil fuels or reduce the cost of trading with Europe.

Not surprisingly, the Monetary Policy Committee have significantly increased the base rate. You would hope this would get inflation under control quicker. This will have an impact on people who are on tracker rates and those looking to remortgage in the next six months.

I think the 0.5% increase will catch some people out as the consensus seemed to be that they would only raise the rate by 0.25%. This increase is going to continue the squeeze on borrowers whose previous low fixed-interest mortgages are coming to an end. Savers should benefit from this increase in the interest rate but as we know banks and building societies are much slower to pass on the increase in interest rates to savers. It seems to me that if we continue with these rate rises, we will end up being pushed into a recession as there will be a tipping point and as there is a lag between increasing interest rates and them taking effect. We don't really know what effect the previous interest rate rises have had on the economy. I don't think it was the right decision. The Bank should have been more hawkish when they originally started raising interest rates and I feel the horse has already bolted in relation to taming inflation with the use of interest rates.

The inflation figure is to blame for the 0.5% increase in the Bank of England base rate today, well that and the Bank being too cautious back in December 2021 when the increases should have been whole numbers like 1%-2% to truly hit the early signs of inflation. The London and South East property markets will slow to a grinding halt now I think. Any growth will be in the areas of the UK that still have cost-effective properties of small portions to incomes (North East/North West). Savers will "eventually" benefit from this 0.5% hike.

After the disappointing data around inflation yesterday, it was inevitable that the perpetual attack on borrowers in pursuit of the mythical Golden Fleece of 2% inflation would continue, regardless of the lack of any real evidence that the effect of the previous rate rises has been allowed time to filter through and be measured and assessed yet. Given its predictability, lenders and markets have largely already priced in the relentless hammering of the same nail that the Bank of England continues to pursue, so the effect on fixed rate mortgages now that it has actually happened will likely be negligible. With approximately six weeks until the next MPC meeting, it must be hoped that inflationary data begins to finally show a positive movement and jaded borrowers can obtain some respite, but with optimism for a swift recovery to happier times waning, sadly it seems like the second half or 2023 will be a challenging one for individuals and the UK housing market as whole.

The saddest thing is that many people are trapped in a situation that isn't of their own making and are fearful of rising mortgage payments. With base rate now at the highest level since 2008, the markets are predicting a peak at 6pc in February next year. The stories of expected house price crashes are way off the mark, I feel. I think there will be a house price correction after many years of cheap borrowing, but don't panic, stay calm and plan for the long term. Your home is your home so take the long view. If it becomes unaffordable in the short term, then speak to an adviser about your options and work out a plan to keep hold of your home. I think the pain will be relatively short-lived - 6 to 9 months perhaps, so it's a case of just trying to get through this phase. Most lenders and advisers want to step up and support you by offering help such as mortgage payment holidays or extending your mortgage term. Don't suffer quietly, ask for help.

The Bank of England has made it clear they will send us into a recession if needed to fight inflation and this latest rise will do exactly that. They are raising rates too fast without allowing time for previous rate rises to feed through to the economy. Small businesses are facing increased borrowing costs and insolvency is on the rise, this is not going to end well.

Given the current level of inflation, it comes as no surprise that there has been a 0.5% increase in the base rate. This adjustment is a direct result of effective monetary policy in action. Frankly speaking, anyone who didn't anticipate this outcome might benefit from reevaluating their perspective.