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More mortgage rate pain on the way as Bank of England boss says "we have to see the job done"

Journalist: Sarah O'Grady, Daily Express

ended 31. August 2023

Interest rate setters must "see the job through" on bringing high inflation back to target, Bank of England's top economist Hugh Pill has said. The Bank has increased rates 14 times in a row, to 5.25%, and is widely expected to vote for another hike at its next decision on September 21. Inflation has eased back to 6.8% from a recent eye-watering peak of 11.1% last October, but is still far from the Bank's 2% target.

Comments on what this means for mortgage payers facing more painful interest rate hikes and the wider property market.  
 

7 responses from the Newspage community

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Michelle LawsonVerified
Director at Lawson Financial
It is really about time that 'the 2% dream' is put aside for a moment as far too many other reports are saying how damaging these rate rises are for the general public, business and the economy as a whole- just to get 2% inflation. There are far greater concerns beyond this and, given that inflation has shown signs of abating and further data is due on 20th September, I personally think a hold this time would be more sensible. The BoE have not actually taken stock yet to see the impact of the 14 other rate rises before potentially causing more havoc with yet another. They really beggar belief.

For mortgage holders, this will only generally affect those on trackers or variable rates linked to BoE. Fixed rates which are priced on SONIA swap rates are showing signs of reduction which is echoed by the numerous lenders reducing their fixed rate products.
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Craig FishVerified
Director at Lodestone Mortgages
A further increase from the Bank of England is widely expected and is quite likely to be the last increase this year, assuming that inflation data is looking more favorable. This isn't as bad as it may seem for mortgage holders though as we are currently seeing a downward trend in mortgage rates and swap rates.
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Riz MalikVerified
Independent Financial Adviser at R3 Wealth
The Bank of England is failing the British public with every rate rise. This is evident by their desire to parachute in Dr Ben Bernanke to oversee their operations and forecasting. The only thing more hopeless is the government whose ‘sit back and do nothing’ approach towards the UK economy is shameful.
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Elliott CulleyVerified
Director at Switch Mortgage Finance
The risk is the Bank of England goes too far. Although most data has been positive over the last month the wage inflation data was a record high. Also in America, there is talk of upping the federal rate, usually the Bank of England usually follows as to not weaken the pound. This will affect clients on trackers and variable rates, I don't think this will mean fixed rates rising.
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Gary BoakesVerified
Director at Verve Financial
The lenders like to be ahead of the curve and will already be aware of the impending rate rise increase in September, the good news is we are seeing lenders reduce their rates on a weekly basis at the moment. I see the lender rates being fairly stable now for the next 1 maybe 2 base rate rises, it will only change if we need to go further than what is expected we will see major increases like we did back in June when we released 4.5% was not going to be enough.
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Scott Taylor-Barr0
Principal Adviser at Barnsdale Financial Management
There may feel like an odd disconnect to many as the Bank of England continues to push up the central interest rate, yet we see lender after lender announce rate reductions for new deals and the vast bulk of existing mortgages are on fixed rates. So, what's going on? One of the key things to remember is that a change to base rate impacts far more than just mortgages, mortgages get all the commentary, but a base rate change also affects all forms of commercial lending (many commercial loans are on tracker or variable rates), new car finance deals, new personal loan deals, personal and corporate credit cards (as most are on a variable rate arrangement) and it is these areas the Bank really hopes their increases will bite and slow down our spending (or in the case of businesses, reduce their ability to give above inflation pay awards), thus bringing down inflation back to target.
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Imran Khan0
Co-founder & CEO at QuantumLoopAI
This year, London saw its largest-ever annual increase in rents, reaching all-time highs and stretching affordability to the limit. With interest rates 21 times higher since December 2021, both landlords and homeowners are nearing breaking point. This rate hike has pushed renters down market tiers: those usually opting for studios or one-beds now find themselves considering room lets.

We predict a spike in repossessions emerging in Q1 and Q2 of 2024. The continuous rate rises are forcing landlords and homeowners to sell, often due to unsustainable mortgage levels. Remarkably, while rents soar, house prices are declining. This is not a choice; it's a forced market reaction. The financial strain is expected to intensify, especially if rates rise to 6% or 7%. The market dynamics are irrevocably changing, heralding a challenging era for the UK property sector.