MPC rate decision Sept 22

If you're already on a fixed rate deal with some time left to run you don't need to worry too much, although if I had any spare cash I'd be overpaying each month to bring the balance down so that in a few years' time the inevitable increase in your repayments stings a heck of a lot less. If you are on lender's standard variable or have a fixed rate ending within the next six months, you may want to call a mortgage broker as rates are going up by the day. I have one client where securing them a new rate just a week earlier is now saving them over £350 a month in interest.

With more large increases almost certainly to come, it won't be long until millions of homeowners are financially crippled. We're soon going to hit the main wave of customers coming off ultra-low 1% deals facing the realisation that their mortgage payments are increasing by hundreds of pounds per month. People will argue rates are still low versus the 90's and early noughties, but this period can't be compared. Back then you could buy a house for the equivalent of two Freddo bars whereas now house prices have never been so disproportionate to the average salary. Many first-time buyers are already reaching the point that when you quote a rate they're deciding it's too expensive to proceed with the house purchase they had planned and this move is surely going to damage the possibility of people getting onto the housing ladder in the near future.

The Bank of England was asleep at the wheel when inflation started rising in 2021 and is now hammering borrowers with another 0.5% rise. This will do nothing to bring down the global price of gas, oil and energy, which are the current primary drivers of inflation. However what it will do is increase further the cost of mortgages and other borrowing for homeowners, businesses and landlords. The only benefit I see is that is may help prop up the falling pound against the dollar, which can help make imports (including energy) cheaper.

This latest rate hike will mean a sizeable increase in mortgage payments is on the horizon for borrowers who fixed in the last two or three years at historically low rates. Coupled with the increased cost of living this, this latest rate rise will hit most household budgets big time. Borrowers need to speak to a broker as soon as possible to have their circumstances and mortgage reviewed to make sure it is still within their budget, and be protected from any further potential increase later this year. How this impacts the property market will depend on what the Chancellor decides to do with regard to the Stamp Duty rules. If there is a holiday, this may increase demand and in turn increase house prices like what we had after the first lockdown. However, buyers will potentially end up paying more for the house than the saving in stamp duty. This will lead to a greater mortgage debt and a higher interest rate, so the borrowing will cost more in the long term.

This hike of 0.5% from is arguably less than expected, and less than the 0.75% delivered by both the US Fed and the ECB. It indicates the Bank of England are balancing the risks of inflation and an economy still recovering from Covid and being hit hard by the cost of living crisis.

The 0.5% hike in the interest rate seems overly cautious. The Federal Reserve raised rates by 0.75% yesterday. Seeing as we haven't followed suit, it's likely the dollar will strengthen even further against sterling. As imported energy is priced in dollars, this will cause UK inflation to increase. If the Bank of England base rate hike was designed to quell inflation, it seems a strange way to go about it. In the USA, Fed chair Jerome Powell has predicted a 'correction' to house prices, and they are likely to fall in the UK, too. Particularly as mortgage rates could be hitting 5% in a few months.

This was a masterclass in political manoeuvring from the Bank of England. Allow rumours of a 0.75% increase to run wild and then, when you only raise it by 0.5%, we all feel we've dodged a bullet. In terms of mortgage borrowers, the rate rise will filter through to those on variable rates over the coming days and weeks, but for those on fixed rates nothing will change. For now. Lenders have already increased rates on their new business deals in recent weeks, pre-empting this rise, so it's unlikely we'll see any dramatic market shifts. This increase was a surprise to no-one. The real issue however is the push-me-pull-you that appears to be happening between the Bank, who are increasing interest rates to try and stem inflation, and the Government, who are injecting cash into the economy in terms of energy price caps, direct support with energy bills and tax cuts. All these moves are likely to increase inflation and so undermine the Bank's attempts to control it, potentially, leading to further rate rises.

The Bank of England base rate rise of 0.5% to 2.25% will sharply increase the cost of living pressure on those needing to renegotiate their mortgage due to a fixed rate ending or considering getting on to the property ladder. We have a whole generation of adults, specifically those under the age of 30-35, who in their adult life have only known low rates. We are now entering a prolonged period of change, where rates are rising month on month, and this will no doubt cause anxiety for those at greatest risk to these market changes. Anyone with a mortgage product that is expiring within the next six or seven months should already be investigating their options. Those with longer periods to run on their fixed rates should begin to look at their overall financial profile and spending making savings where possible to free up funds for a likely payment shock. These increased costs of purchase are also likely to put downwards pressure on property prices, however currently demand is still outstripping housing supply, so property prices are holding up for now. However, as rates continue to rise, they become less and less affordable so logic would suggest prices need to readjust accordingly.

The cost of borrowing has just gone up and that will take money, which may otherwise have been earmarked for discretionary spending, out of the economy. Of course, where the cost of borrowing has been fixed by the borrower, it has no immediate impact but as and when the fixed rate expires, the impact will be felt. It’s likely to create a deflationary effect within the property market as buyers and lenders alike will have lower margins on affordability. This is part of the expectation of central bankers. There is demonstrable evidence that links rising house prices with increased confidence and demand from consumers. At a time of rising inflation, above Bank of England target levels, policymakers will seek to reduce the house price rises. It should, in theory, relate to higher interest rates for savers. However, the rises can take some time to manifest in retail savings products, mainly because banks and other institutions will hedge their products against prevailing rates for a fixed period and this period may need to expire prior to a new rate being made available. The general consensus is that higher interest rates (and the expectation of rising base rates in the future) is negative for the capital markets but the true position is much more nuanced. The increase of 0.5% earlier today could potentially be reflected in opposing views: As the actual rate rise was seen as lower than that generally expected, this could be taken favourably. However, if the market feels as though inflation will not be controlled by a weaker measure and will continue to represent a significant headwind to corporate earnings, it could react unfavourably. Similar to the capital markets, much depends on the confidence that currency market makers (whether that be participants or associated brokers) have on the economic impact of the measures. This can also vary in the short term and long term and can lead to variances in both. We believe it is fair to comment on the opposing strategies of fiscal and monetary policy. On the one hand, the BoE is seeking to control rising prices by increasing base rates, whereas the government is seeking to create opportunity and positive reaction (and thus create inflation) by stimulating the economy through widely-expected tax cuts for business and households. There is no indication that any change of course will result from Thursday's announcement, however, you would hope (nay, expect) that the new Chancellor has monitored and factored in the position to his own thinking.

For those on longer term fixed rate deals, this rate hike is of no immediate concern, but for the significant amount of borrowers who took out 2-year fixed deals in 2020 when rates were on average around 2.24%, they are facing a fairly seismic shock when they come to switch deals. In most instances, around at least 14% of a rise in monthly payments will be the norm, which equates to an increase of roughly £135 per £100k of a mortgage and a sizeable chunk out of many people's already squeezed monthly budgets. The already slightly flatter property market I expect will be relatively unmoved by these rate rises as supply continues to be restricted. However, with rumours of stamp duty cuts incoming then it's likely that - if anything - another surge in activity if not necessarily prices may now be more likely over the coming months. With rising rates, legislation and the general cost of living, I think the buy to let sector is one area that is in for a rocky ride, with many landlord investors now having to seriously consider the overall short-term viability of their portfolios in relation to other investment vehicles. A long term approach is advisable, but the old adage, "You can't go wrong with bricks and mortar", is now coming under serious threat when, at this rate, after finance costs and taxation, the average landlord might be lucky if they can generate enough monthly income to pay for a fish supper and a bottle of IrnBru."

The latest Bank of England base rate increase from 1.75% to 2.25%, though expected, now takes borrowing costs to their highest level since 2008. There have been many factors in this increase starting with Russia’s invasion of Ukraine creating a domino effect, which has pushed up prices of goods including oil and gas, which has triggered the cost of living crisis. This latest rate increase is intended to kerb rising inflation, but it will be damaging many homeowners with a mortgage, unless they’re on a fixed rate. We have seen rates rise several times with some as often as every few weeks recently. People with mortgages and loans have had it good for a decade and a half and have got used to low rates and it has become the norm. For many younger people who are in their 20s, 30s & 40s and have mortgages, this will be more of a shock as they’ve probably never experienced such high rates. I think property prices have been over inflated since the pandemic and this will see a slowdown in the property market. This will be good news for savers but with the cost of living crisis we are currently facing, who has money to save when it is being spent on rising costs? My tip for people who are still on a low fixed rate is to make overpayments to their mortgage if their budget and mortgage product allows so that when their fixed rate ends, it will not be such a shock to their finances. I think think the UK will be waiting with bated breath to see what plans the chancellor, Kwasi Kwarteng, will set out in the mini-Budget on Friday.

It's no shock that rates have gone up. Mortgage borrowers will see an increase in their costs when they look to renew. I have a client who is coming to the end of his fixed rate at 1.19%, and the lowest rate now is 4% for a 2-year fixed rate. This is a huge increase.

The Government handed the Bank a get out of jail card. We have seen a 0.5% rise rather than the expected 0.75% rise primarily because the "Government’s Energy Price Guarantee will lower and bring forward the expected peak of CPI inflation". In short, the Government's Energy Price Guarantee will artificially lower inflation and hence reduce the perceived need for higher interest rates to control inflation. Aside from the smoke and mirrors, that might be fine but for the fact that Sterling is bouncing around historic lows against the Dollar and this slide is likely to continue as the US raises rates faster than we do. This means the cost of the Government's Guarantee will increase behind the scenes leading to higher national debt in the long term and hence a lot more economic pain. Inflation is the tip of the iceberg but the slide in Sterling is the underwater part that will sink the ship.

A lot of money anxiety stems from uncertainty and for many, Thursday's interest rate rise will fuel that feeling of dread. With two 0.5% base rate increases in just two months, borrowers and business owners will be wondering where it stops. For mortgage holders with a lengthy fixed rate deal, take a pat on the back but consider what the impact could be when that fixed rate comes to an end. It could be worth building up more savings or making overpayments to reduce the debt further. For those on variable rates or fixed rate deals nearing maturity, it's worth doing some urgent research to look at options, as the cost of debt is now increasing daily. Remember than non-mortgage debt will also get more expensive. Credit cards, personal loans and overdrafts will likely feel more painful and it could be time to re-assess your overall financial picture. Spare a thought for small business owners who may now be tackling increased business borrowing on top of their personal finances. There's always a way to create more financial security, but it may need a bit more effort for some than for others.