BoE ups interest rate to 4.25% — industry reacts

Two members preferred to maintain the rate at 4%.

The MPC said will continue to monitor closely indications of persistent inflationary pressures — if there is evidence of such pressures, it confirmed that further tightening in monetary policy would be required.

Industry reacts to BoE increasing base rate to 4.25%

This section will be updated throughout the day — check regularly for more comments from industry experts

16:30pm

James Bawa, CEO at PEXA UK: 

“The continuing rise in interest rates is taking mortgage payments with them. Another rise in interest rates is likely to result in a significant proportion of borrowers rushing to lock in existing deals in case rates climb further.

"Higher interest rates might mean that we see a fall in the number of property transactions overall, but it might spur action from homeowners looking to manage their finances more closely.  

“A rising interest rate environment will continue to encourage borrowers to shop around, as customers who took out a two-year fixed rate mortgage during the stamp duty holiday in 2021 will see their deal come to an end this year. 

"To help the mortgage market cope with growing remortgage demand, and position it to capitalise when transactional activity bounces back, technological innovation is needed. 

"Digital remortgages are going to be key in transforming the property market, helping to increase capacity, reduce friction and improve customer experiences in a market where interest rates continue to rise.”

14:30pm

Luke Thompson, founder at PAB Wealth Management:

"The Bank of England really had no choice but to raise the base rate with the recent news that inflation was still on the rise.

"The prediction that inflation will be at 2.9% by the end of the year looks fanciful at best and if they can't get this under control soon, more base rate rises could be on the way.

"In terms of interest rates being charged by lenders, swap rates have been on the rise again in recent days so we may start to see lenders increasing their rates soon, even though rates have been falling for the past seven to ten days.

"I will be interested to see if lenders are as quick to pass on increases to their savings rates to customers, as they are to pass on the increases to the SVR that they charge mortgage customers."

1:15pm

Adrian Anderson, director at Anderson Harris:

"Mortgage holders hoping that the Bank of England would pause the interest rate rises were dealt a blow yesterday by the surprise leap in inflation to 10.4% in February 2023. 

“Today’s rate rise to 4.25% is consistent with the Bank of England’s plan to battle inflation, but it means no gain, just more pain for mortgage holders who are already squeezed. This will be particularly challenging for homeowners who have chosen to take a variable rate mortgage in the short-term, in the hope that inflation reduces and they can select a lower longer-term fixed rate than what is available now.”

1pm

Mark Harris, chief executive at SPF Private Clients:

"While 4.25% may not be the peak for base rate, it is unlikely to be far off.

"Fixed rates are influenced by future base-rate movements and therefore not directly linked to what is decided this week. Indeed, several lenders have reduced their fixed-rate mortgages in the past few days on the back of declining swap rates, with five-year fixes now cheaper than base rate.

"Those on base rate trackers will find their mortgage rate increase by 25 basis points. A borrower with a £250,000 repayment mortgage on a 25-year term and a pay rate of 4% will see that rise to 4.25%, with monthly payments rising from £1,320 to £1,354.
 
"With a variable rate deal, the link between the lender's price and base rate moves are less transparent; the lender may decide to pass on none, some, all or even more than the base rate rise.

"With so much volatility in the markets, it is more important than ever that borrowers seek advice from a whole-of-market broker."

Adam Oldfield, chief revenue officer at Phoebus Software:

“The 'will they, won’t they' of the past few days has now been settled and for most, it’s not the decision they were hoping for. Unfortunately, there are many factors weighing heavy on the global economy and recent events in the banking sector have added further to the turmoil.  The unexpected rise in inflation announced yesterday no doubt gave the committee grist to the mill.  

“There is the suggestion that the rise in inflation last month was a temporary blip, and we should start to see the numbers coming down again soon. If this is the case, it’s hard to see that the Bank of England will have any cause to put the base rate up again in its next meeting. The problem is that we were just starting to see the housing market moving again, so the news of another increase could well give people further pause for thought.  

“The only light is that we’ve seen lenders reducing rates in the last week, so perhaps they may not be as quick to put rates up if current swap rates are baked in. Nevertheless, for those on SVRs or trackers, it’s a worrying time, and lenders, I’m sure, will be getting their houses in order to ensure exposed borrowers get the support they need.”

12:15 pm

Tomer Aboody, director at MT Finance:

“Following the unwelcome news that inflation has risen again, it was inevitable that interest rates would have to follow suit in order to try to get the former under control.

“While the government's target of halving inflation by the end of the year might now look slightly optimistic, many believe that the right course of action is being adopted in the background.

“There are concerns that further rate rises could result in further issues for the banks, but let's hope there is enough stability to counter that risk and that this rise is the penultimate, if not the last, before the bank can start reducing base rate.”

John Philips, operations director at Just Mortgages:

“This latest 0.25 percentage point rise may feel like a step in the wrong direction for the mortgage market, but it’s widely accepted to be a necessary step in the battle to curb inflation. 

“Although the base rate has gone up, we have seen mortgage prices falling in recent months and customer enquires to our brokers across the country have been remarkably robust since the start of the year. 

“The advantage of yet another rate rise is that nobody should be caught off-guard and I think that brokers are doing a tremendous job in managing the expectations of clients and finding them the right deal."

Andrew Gething, managing director at MorganAsh:

“The news of a surprise jump in inflation last month was clearly enough of an excuse for the Bank of England to make another increase. Without this, the expectation was the MPC would look to hold rates, signalling that this may well be the last for a while. 

“This will be of little comfort though to the more than 1.6 million households on either tracker or variable mortgages. Thanks to today’s decision, they will once again see an almost immediate impact on their monthly mortgage payments, which is on top of a rise in other outgoings, mainly food costs. 

“At all levels across financial services, it’s once again a reminder that firms must be alive to challenges facing those vulnerable customers who will be most susceptible to harm — after all, the upcoming Consumer Duty regulation brings with it the obligation to not only identify, but monitor the vulnerable characteristics of all customers throughout the lifetime of the product.”

Jatin Ondhia, CEO at Shojin: 

“Today’s interest rate decision was on a knife-edge. The stakes were so high with elevated tensions across the US and European banking systems and yesterday’s shock rise in inflation — this all undoubtedly turned the heat up on the Bank of England, and it is telling that it opted to stick to its tough line of hiking interest rates to curb the cost of living crisis.

“Those hoping for a respite from tighter monetary policy may have a longer wait ahead than anticipated, as policymakers grapple with the dual task of confronting inflation and easing bank jitters. 

“As such, in the current climate, investors must stay focused on their individual goals, assess the risk exposure they are comfortable with, and ensure they are using all the tools and techniques at their disposal to protect their wealth against uncertainty and changing market conditions. If they do, they could find new opportunities amid all the turbulence. From diversification to tax efficiency, agility will be the watchword as the foggy conditions persist.”