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Today’s increase in the base rate to 4.25%, although not a surprise to most, nevertheless caused disappointment, along with some resignation with the projected direction of movement.
The general feeling is that although the increase was less than 50 basis points in February, an increase was inevitable given the surge in inflation in February and yesterday’s price hike by the US central bank.
There are concerns about those using variable rates, but as a number of lenders cut their fixed rates this week, it is believed that the projected increase in the base rate has been factored in and the impact in this area will be negligible.
Rhys Beddall, director of sales and marketing at Bluestone Mortgages, said: “While today’s decision is clearly in response to the unexpected jump in inflation to 10.4%, consumers will nonetheless find this pill hard to swallow. Interest rates have risen steadily for almost a year, pushing up mortgage payments and tightening people’s personal finances. Accessibility issues will no doubt remain for the foreseeable future.”
Moneyfacts financial expert Rachel Springall comments: “The base rate hike will be disappointing news for borrowers who are not tied to fixed-rate mortgages. The impetus for locking in is the continued rise in the average standard variable rate, which is now above 7%, a level that has not risen since 2008.”
Also expressing disappointment, London real estate agent and former RICS chairman Jeremy Leaf adds: “There is a strong link between change and no change – this latest rate hike is a huge disappointment for the housing market as we were hoping the bank would trust its own data and leave at rest”.
Stonebridge chief executive Rob Clifford called the boost “racing confidence” but doesn’t expect much change.
“Following the news that inflation rose to 10.4% in February, followed by the Fed’s decision yesterday to raise US rates, it looked like the MPC would have to act today with a further increase in the bank’s base rate.
“Markets have already reacted to this news by raising swap rates and by this morning the rate hike seemed to have been priced in. I feel that the search for business, especially among major major lenders, will continue. Mortgage rates are about the same as they are now,” he says.
Just Mortgages Chief Operating Officer John Phillips adds: “While the base rate has risen, we have seen mortgage prices drop in recent months and customer inquiries to our brokers across the country have been surprisingly strong since the start of the year.”
A possible outcome could be an increase in demand for rental housing, says Avinav Nigam, co-founder of real estate platform IMMO.
“The result of this is an increase in the demand for rental housing and therefore the need to invest time, money and effort in improving our private rental housing,” he comments.
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