BoE hikes interest rate to 2.25% — industry reacts

While five members were in favour of the current rate increase, three members preferred to up the bank rate by 0.75 percentage points, while one member voted to increase it by 0.25 percentage points.

This is the seventh consecutive increase since the bank cut the rate to 0.1% two years ago as a result of the coronavirus pandemic.

While the peak in measured CPI inflation is now likely to be lower than projected in the August report as a result of the Energy Price Guarantee, the bank predicts that inflation will remain above 10% over the following few months, before starting to fall back.

Industry experts react to Bank of England interest rate increase

This page will be updated throughout the day with comments from industry experts — stay tuned to find out their reactions!

3pm

Lewis Shaw, founder of Shaw Financial Services:

"This is more of the same from the Bank of England with another 0.5 percentage points rate rise.

"The plan is death by a thousand cuts, or in this case, rises — with mortgage rates continually on the up and no real signs yet of inflation coming under control, the only lever available to Andrew Bailey [governor of the Bank of England] and the MPC is to raise rates.

"We need to hope that this doesn't trip us into a nasty recession, which it has every chance of doing."

Marcus Wright, MD at Bolton Business Finance:

"The Bank of England was asleep at the wheel when inflation started rising in 2021 and is now hammering borrowers with another 0.5 percentage points rise.

"This will do nothing to bring down the global price of gas, oil and energy, which are the current primary drivers of inflation; however, what it will do is increase further the cost of mortgages and other borrowing for homeowners, businesses and landlords."

Emma Hollingworth, distribution director at MPowered Mortgages:

“Today’s decision is indicative of the pressure building on the Bank of England as it faces the highest inflation rate in decades and a new government keen to cut taxes to stimulate the economy.

“Securing rates quickly, before they disappear and are replaced, is likely to become an increasingly important factor for homebuyers and those looking to remortgage. 

"MPowered Mortgages has worked out that a homeowner could save over £2,000 over a two-year period if they lock into a deal now, if mortgage rates rise alongside the base rate by a further 0.5%.

"In the current climate where mortgage rates and the cost of living continue to rise, borrowers may choose to consider longer-term fixed-rate mortgages so that they can have certainty over their monthly mortgage payments over a longer period."

12:55pm

Scott Taylor-Barr, financial adviser at Carl Summers Financial Services:

"This was a masterclass in political manoeuvring from the Bank of England — allow rumours of a 0.75 percentage points increase to run wild and then, when you only raise it by 0.5 percentage points, we all feel we've dodged a bullet.

"In terms of mortgage borrowers, the rate rise will filter through to those on variable rates over the coming days and weeks, but for those on fixed rates, nothing will change for now.

"The real issue however is the push-me-pull-you that appears to be happening between the bank, which is increasing interest rates to try and stem inflation, and the government, which is injecting cash into the economy in terms of energy price caps, direct support with energy bills and tax cuts.

"All these moves are likely to increase inflation and so undermine the bank's attempts to control it, potentially leading to further rate rises."

12:45pm

Mark Harris, chief executive at SPF Private Clients:

"While a 50 basis points rate rise does not feel as aggressive as the 75 basis points that was mooted in some quarters, it still means a considerable increase in monthly payments for those on variable rate mortgages.

"However, we don’t believe rates will or should go much beyond 3%, despite fears that they could go higher — if the Bank of England was to hike interest rates to 4% or 5%, it would risk causing greater problems than those it is attempting to control. 

"Mortgage deals can be reserved up to six months before you need them, so it may be worth securing a new product now which can be moved onto once your existing deal ends.

"We are being approached by many borrowers on fixed rates considering paying early redemption penalties in order to secure another fix sooner rather than later — this may or may not be in your best interests, depending on the rate and length of time left to run, so it is important to seek advice from a broker."

Tomer Aboody, director at MT Finance:

"With the trend in rising interest rates continuing, the property market is slowly showing signs of calming down from the frenzy of the past couple of years. 

"With property values at record highs, a continuous upward curve in pricing isn't sustainable or helpful and the return of more realism is long overdue.

"Could this be the perfect time for a restructure or change to stamp duty? As we saw during the pandemic, any change stimulates the market, allowing more sales and transactions.

"While a stamp duty holiday usually leads to an increase in prices, a big rise in values is unlikely due to the higher cost of living and restraints on affordability caused by rising interest rates."