BoE interest rate jumps to 3.5% - industry reacts

Two members preferred to maintain the bank rate at 3%, while a third member preferred to increase the bank rate by 0.75 percentage points 3.75%.

The majority of the MPC decreed that further increases in the bank rate may be required for a sustainable return of inflation to target.

If economic outlook presents more persistent inflationary pressures, the MPC said it will respond ‘forcefully, as necessary’.

Industry experts react to BoE’s interest rate increase

This page will be updated throughout the day with comments from industry experts — stay tuned for further reactions

2:58 pm

Jeremy Leaf, north London estate agent and a former RICS residential chairman:

"Such a substantial increase in base rate is alarming, particularly for its impact on confidence to buy property, which can compromise activity in the housing market.

"However, this rise has been expected for some time, with lenders already factoring it into pricing of fixed-rate mortgages.

"Indeed, brokers tell us that they don’t expect these to go any higher; if anything, they are likely to stay the same or continue falling slowly.

"Existing sales are proceeding, while new buyers are thin on the ground and deciding on next steps over the holiday period.

"We expect them to slowly return but negotiate hard, aware that the balance has shifted very quickly their way and they will do their best to take advantage."

12:18 pm

Richard Pike, chief sales and marketing officer at Phoebus Software:

“Another rate rise from the BoE today was not unexpected; however, global interest rates are rising, so it’s a strategy that is widely believed to be the best way to curb inflation.

“There were question marks though, with many asking whether the speed at which rates are being increased may cause further problems for the economy. 

“Nevertheless, we saw the first signs this week with inflation falling very slightly, that the plan may be starting to work.

“Although mortgage rates have been coming down, we are now seeing some high-street banks increasing their rates. 

“Those on interest only or with deals coming to an end will be looking into 2023 and wondering how much their new mortgages are going to be costing them. 

“Advisers and lenders will be looking closely at their books to not only assess where the opportunities lie, but where the vulnerabilities may be. 

“This will be made that much easier with the right systems in place and a clear plan of action should things change quickly.”

12:13 pm

Tomer Aboody, director at MT Finance:

“Although borrowers will feel that rate rises are coming thick and fast, hopefully this will succeed in getting double-digit inflation under control quicker.

“The prime minister and his team will then need to come up with some stimulus to turn up the economy and ensure the hurt isn’t long term.

“Borrowers will have to come to terms with the new norm, which is higher interest rates, as the rock-bottom rates of the past are long gone.

“As rates rise and the cost of living increases, the negative impact on the housing market is inevitable.

“Given the importance of the housing market to the wider economy, the government needs to provide some form of assistance to stimulate the market.

“This could take the form of a restructure of stamp duty or some form of mortgage interest tax relief to alleviate some of the many stresses that borrowers will face in coming months.”

12:12

Andrew Gething, managing director at MorganAsh:

“Today’s decision by the MPC confirmed what many in financial services expected and had, in fact, already priced into fixed rates.

“It also hints that last month’s efforts to front-load rates with an aggressive rise of 0.75 percentage points may have been the exception rather than the new rule, especially as the base rate is predicted to peak below expectations.

“Recent indications that the inflation increase is slowing is encouraging, as we should see a drop in inflation quite quickly and hence release pressure to increase rates.

“As the BoE takes difficult measures to bring inflation down, providers, brokers and advisers must identify those customers with vulnerable characteristics who will be most susceptible to harm.

“This is especially true with changing affordability, harsher criteria and tougher stress tests.

“Implementing a consistent method to assess vulnerability must become a priority for financial services firms, especially as more consumers potentially fall into this category.

“Not only is it essential in protecting customers and delivering good outcomes but meeting the requirements of consumer duty.”

12:08 pm

Nick Chadbourne, CEO at LMS:

“Today’s interest rate decision from the BoE has seen the base rate climb further still, but there is still no need for mass panic — the rise has already been priced into the money markets, so it shouldn’t impact new mortgage products.

“Homeowners need to bear this in mind and know that there are still options available to help them find products and rates most suited to their needs. What we do expect is for this to affect SVR.

“The remortgage market has slowed in recent weeks as the difference between SVRs and new products is nominal, so borrowers are waiting to see if product rates drop further — they will indeed drop, so this is to be expected.

“However, with SVRs now likely to increase again, this will no longer be the case, so the thought of unknowingly dropping onto such a rate will become unfavourable once more.

“This will inevitably drive increased market activity as we head into 2023.”