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One year of interest rate rises

Journalist: Rachel Mortimer, The Times

ended 13. December 2022

We are writing a piece this week to mark one year since the first BoE rate rise in December 2021. 

Keen to hear from brokers if they have ever before seen mortgage rate rises at the same speed as those we have had in the past 12 months. The pace at which they rose took many by surprise, was it unprecedented? 

Are borrowers who delayed locking in a rate or buying a home now in for a shock given how far rates have risen since last year? 

Would appreciate your anecdotes! Thank you. 

13 responses from the Newspage community

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Editor
Samuel Mather-Holgate
Independent Financial Adviser at Mather and Murray Financial
Rising rates around the world aren't just a product of war in Europe, but also the experiment of quantitive easing for a decade. Rather than raising rates, central banks could reverse QE and this would have been less painful for consumers but still control inflation. Central banks in the West have got this policy wrong from start to finish. They continue to raise rates when the economy is about to hibernate for winter, and probably Spring. They should be freezing now but they won't. We'll see another rise this week. The Bank will pivot, but it will have caused untold damage to homeowners and renters alike and they will have to cut rates sharper and faster than they otherwise would have if they started looking forwards now rather than backwards. The Bank needs a new mandate, not just controlling inflation, but also looking at the economy.
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Mike Staton
Director at Staton Mortgages
Whilst many people stay up to welcome in the New year, I'll be staying up to make sure the old one leaves. What a year it has been in the mortgage industry. We've had historic rate increases, and unprecedented speed of criteria and product changes from lenders. Hindsight is a beautiful thing, as many people who wanted to wait to see what happened have shot themselves in the foot. I think the 2022 mortgage industry was a book written by Stephen King.
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Imran Hussain
Director at Harmony Financial Services
The rate rises of the past 12 months have been nothing less than explosive. We all expected rates to rise but not as aggressively as they have had to due to Trussonomics and skyrocketing inflation. Stagnating wages, coupled with a huge hike in living costs, means the next 12 months are going to be a rough ride for the property market.
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Benjamin Blyth
Director at Houz Mortgages
Early in my career, which began in 2007, from my building society branch I witnessed our savers' rates drop from almost 6% to nothing overnight. By 2014, I was working in mortgages, and so in my personal and professional adult life have known nothing but low mortgage rates. The recent rise has been a once-in-a-generation surge. Many borrowers will have only ever shopped around for a cheaper deal each time. The pace at which rates have increased this year has caught so many off-guard. What has shocked me most is the number of people who were not organised, those who didn't start shopping around when they could have done and so missed the opportunity to fix low, typically six months before rate expiry. This has cost people thousands of pounds per year that they could otherwise have used to overpay their mortgage to reduce it faster.
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Paul Holland
Mortgage Broker at Henchurch Lane Financial Services
The 2.9% base rate increase this year has put a lot of borrowers in a tough position. In January, I arranged a remortgage for a couple and secured them a rate of 0.99% on a 2-year fixed deal. Their £320,000 mortgage costing them close to £1,000 per month would cost them more like £1,700 if it were arranged in today's money. While people are worried about energy prices increasing, many people's mortgages will be increasing by a much greater amount come the end of their fixed rates. We urge anyone on a fixed rate to sit down with their broker sooner rather than later to assess their situation and pre-empt the rate shock.
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Scott Taylor-Barr
Principal Adviser at Barnsdale Financial Management
A rising interest rate market is not a new phenomenon, although granted it has been a long time since we have seen rates rise so sharply and at such a pace. Whilst those that delayed moving or locking into a new deal may be experiencing a little frustration at not being quicker off the mark, it is not them that I worry about, it's those that did heed the warnings and managed to move or lock in before rates headed North. Unless they keep a close eye on the news and their finances, they could be in for a massive shock when their low-rate fixed deal ends. They need to be budgeting now for a higher mortgage payment when they come to review their mortgage deal in the coming years.
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Ashley Thomas
Director at Magni Finance
It has been a crazy year in the housing market. The interest rate changes have been unexpected, the speed of the increase was heavily influenced by the mini-Budget when Liz Truss was PM. Now, though, things seem to have calmed down somewhat. Those that have held off may be better off. If they held off since November they will be in a stronger position, if it was since the start of the year, they will undoubtedly be worse off with a higher mortgage rate.
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James Miles
Director - Mortgage Adviser at The Mortgage Quarter
Yet again we’ve seen a year of turbulence led by the ineffectual Tory gang and a shambolic mini-Budget. Rates have shot up but this is understandable given the uncontrollable inflation rate. However we’ve seen some welcome calm recently amongst the interest rates offered to borrowers. With many products still in the market, borrowers really need to review their circumstances early and obtain advice from their local expert to plan for the foreseeable impact that will come next year.
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Gary Boakes
Director at Verve Financial
Every Bank of England base rate rise was met with what seemed like chaos at the time. Rates were pulled left right and centre, with very little notice. Many a late night was spent submitting applications to ensure the client got the best deal available. But ironically those 6 months were just us warming up before the real hammer blow, namely Liz Truss and her hapless sidekick wreaking havoc in the mortgage market with the mini-Budget. In all my years as an adviser, I have never seen anything like that. Clients who didn't answer the calls, emails and texts in time were left bewildered as rates rose 1%+ overnight. The storm, for now, has passed, but who knows what surprises the Bank of England has for us over the next six months? At least now we are better prepared.
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Joshua Gerstler
Chartered Financial Planner at The Orchard Practice
This is the fastest that rates have risen in my 12 years in the profession. I am seeing the shock that people get when they realise how much more their monthly payments are going to be compared to when they last took out a mortgage two, three or five years ago. So far everyone I have seen has been able to swallow the increase, but I am sure there are plenty out there who are just not going to be able to afford to pay their mortgage lender."
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Robert Payne
Director at Langley House Mortgages
The speed at which the base rate has risen has been a huge surprise and one that has had a significant impact on borrowers, especially those who are coming off the lowest rates in history onto the highest we have seen in well over a decade. There will also be a delayed impact on those who are still enjoying time on a low fixed rate but face the same increase in monthly payments if rates stay as they are. These changes are long-term because even the shortest fixed rate period of two years is still 24 monthly payments at a hugely inflated amount. The worry is that we are yet to see the true impact as many may fall back on short-term solutions such as cash reserves to survive, but this is not sustainable.
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Oliver Cotterell
Director at Windsor Hill Mortgages and Cotterell & Cotterell Commercial Finance
2022 has definitely been a year for change in so many ways. Having seen the Bank Of England base rate below 1% for so long, many of us have never experienced standard residential products above 3%. Yet here we are with the Bank of England Base rate at 3% and expected to rise a further 0.5% in December. In theory lenders continued lending during the vast increases and the Liz Truss era, however, there have been many cases that we have seen that lenders have provided no reason at all to not proceed. Now that there appears to be more stability in the economy with Sterling increasing in strength, we have seen lenders reducing rates, some even below the 5% mark again. The market certainly appears to be looking more positive, but those who have yet to remortgage may still be in for some serious mortgage shock.
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Amit Patel
Adviser at Trinity Finance
The BoE is expected to raise rates yet again this week. This will heap more misery on borrowers and businesses up and down the country at a time when they need a helping hand to alleviate the pain from the cost of energy, which is pushing inflation sky high, which in turn impacts basic commodities. A bleak 2023-2024 beckons and an elongated recession that will hit living standards, cut business investment and damage the long-term productive capacity of the British economy. We are heading for some extremely choppy waters.