At midday today, the Bank of England announced that it would be increasing the base rate to 0.5%. This decision comes after widespread speculation among market commentators of a rate rise, with the Governor of the Bank of England, Mark Carney, commenting in October that the majority of the committee see a rate rise as appropriate.
Paul Welch, CEO of largemortgageloans.com says:
“It comes as no surprise that the Bank of England has announced a rise in interest rates. Borrowing rates have been unrealistically low for a decade, averaging out at just 1.27%1 compared with an average rate hovering around 5.5% in the previous fifteen years between 1992 and 2006.
The industry and our business is fully prepared for this rise and we have been helping a number of clients finalise mortgages in advance of the announcement. All indications point to this being the first of many rate rises; however there’s no need for borrowers to panic. It’s highly likely the BoE will take a similar approach to the US, where the Federal Reserve rate has very slowly crept up by 1% from 0.25% to 1.25% since the first increase was made in 2015.
With Brexit at the forefront of everyone’s minds, the Bank of England will take a cautious approach and use this increase to test the market before making any further adjustments. Therefore we don’t expect to see another rise until well into 2018 at the earliest.
If you are looking to take out a mortgage, this rate rise shouldn’t be a deterrent. If you can act quickly, there are still deals available. Consider your long term situation and whether to fix your rate. Interestingly, we may actually see variable rate mortgages start to fall, despite the rise in the base rate, as lenders may become less risk-averse with a higher base rate to fall back on. Every situation is different so it’s vital to talk to a broker with a strong network and access to a wide range of lenders to ensure you’re getting the best of what the market has to offer.”
You can read more on the base rate rise here in our Market News.
1 Bank of England official data: http://www.bankofengland.co.uk/boeapps/iadb/Repo.asp
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largemortgageloans.com is a market leader in the UK mortgage industry and the UK’s first mortgage broker to specialise in arranging mortgages above £500,000. Founded by Paul Welch in 2006, largemortgageloans.com is at the forefront of the industry as a result of providing innovative funding solutions, million plus mortgage advice and access to sources of capital not generally available.
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