Hamptons Mortgages has warned that the interest rate rise will hurt homeowners on tight budgets and those that arent on fixed rates.
Jonathan Cornell, technical director at Hamptons Mortgages, says: With house prices growing by around 10% in 2006 and predicted to increase by as much as 8% this year we knew that Monetary Policy Committee was likely to increase the base rate but I am surprised that it has done it so soon after Novembers increase and so close to Christmas.
He warns that for households already on a tight budget the rise will continue to put a strain on their finances.
However, he adds that with bumper City bonuses and demand for property exceeding supply especially in London and the South-East, and consumer price inflation at its highest level for a decade, the MPC needed to yank the reigns to try to slow down houseprice growth and inflation.
Cornell says: Whilst each of the three base rate increases we have had since August last year has brought a relatively small increase to the cost of a mortgage, the combined effect of all three will undoubted start to hurt homeowners who arent on fixed rates.