The Bank of England has increased the UK interest base rate from 0.50 per cent to 0.75 per cent – the highest level since March 2009.
This is the second rate rise in a row, the last occurrence being on 02 November 2017, when it was pushed from 0.25 per cent to 0.50 per cent. It is also the first time that the rate has stood at 0.75 per cent.
The nine members of the Monetary Policy Committee voted unanimously for the increase. The minutes also show that, “all members agreed that any future increases in [the] bank rate were likely to be at a gradual pace and to a limited extent.”
Coreco Mortgage Brokers director Andrew Montlake comments: “After a period of intense speculation it is refreshing to see that the Bank of England has finally acted to raise the base rate further as widely expected. I now expect the Bank of England to maintain this level going forward until we get a clearer picture where inflation and Brexit negotiations are concerned. There is a view that whilst this rise has been made on the back of stronger economic data, projected wage growth and inflation, another reason is so that there is room to cut rates again should a “no deal” Brexit become a reality.
“Mortgage lenders, after they have stopped whooping and punching the air with delight, will be quick to increase their rates and there will be an immediate effect on those borrowers with variable or tracker rate mortgages. Whilst savers will also be cheering this decision, it may be that savings rates will change at a much slower pace if at all, as banks and building societies look to claw back margins and boost profits further.
“Although on the face of it a rise of just 0.25 per cent is not a massive change, this would still be the highest rates have been since 2009 and with consumers used to a decade of low interest rates it may feel more pronounced than usual. On a £250,000 loan over 25 years a 0.25 per cent rise would add approximately £30.69 per month on a repayment mortgage and £52.08 on an interest only basis. That’s £12.28 a month more for a repayment mortgage and £20.83 for an interest only mortgage per £100,000 loan.”