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Bank of England Base Rate Increases Again.

Bank of England Base Rate Increases Again.

The Bank of England announced today that they have increased base rate (BBR) from 0.25% to 0.5%. The change comes almost two months after the rise in December, the first increase in three years. Read on to find out what you need to do to ensure you save money.

Bank of England base rate has once again increased. Back in December, we wrote to you about the rise from 0.1% to 0.25%. Industry experts and professionals had been anticipating this increase, as the pandemic left the market with staggeringly low rates. However, at the time, it was only expected to increase to 0.2%. In a bid to curb the astonishing rate of inflation, The Bank of England increased BBR again , now to 0.5%.

Why is curbing inflation so important?

Over the coming days, as the market adjusts to this news and prepares for the rise in lender’s products, you will start to hear more and more about the importance of curbing inflation. Our sales director, Jeni Browne, comments below on why this is such a pressing matter:

“Inflation is a measure of how much the price of goods and services have gone up over time. The MPC likes inflation to be at around 2% as this means that the mechanics of employment, trade etc., are working well, that the economy is growing, and cost increases are at a sustainable and manageable level. 

When inflation exceeds 3%, the very fine economic balance starts to rock – the cost-of-living increases and, if wage increases are not keeping up, it means that people have less money to spend once they have covered their essential costs. Gordon Brown referred to high inflation as the cause of boom and bust in the economy – it produces low growth and higher unemployment. Therefore, with inflation at 4.9% in December and expected to be higher in January, there is a very real concern that things need to be slowed down. By increasing interest rates, people and businesses are encouraged to borrow less and save more, thus reducing the demand for certain goods and services, which, in turn, could slow inflation down.

Whilst today’s news comes as no surprise, borrowers should prepare for a further two increases over the rest of 2022.”

What does this mean for landlords?

As before, if you are currently on a fixed-rate mortgage that isn’t due to end for a while, then this will not affect you directly at the moment. However, you should be aware that when your term ends, it is likely that your mortgage payments will go up.

On the other hand, if your fixed-term mortgage is due to end soon, or if you are on a variable or tracker rate (BBR trackers specifically), then you will need to monitor what your lender is doing and watch your mortgage payments. The rise will likely impact the market considerably, so it is best to prepare for the changes coming (in particular, how much more you will be paying to your mortgage each month).

While many buy to let lenders squeezed their profit margins after the last BBR rise, managing to continue offering competitive rates with minimal increases, this latest rise will not be the same. We can expect significant mortgage interest rate increases from mid to late February as lenders adjust offerings to this announcement. It’s no longer financially viable for lenders to continue offering borrowing at the current rates, so, the only way is up.

What should I do?

Speak to your mortgage broker. With this rise in interest rates, now really is the very last chance to secure the lowest deals before lenders adjust their products. Our Heads of Buy to Let, Commercial, and Residential select the most exciting rates on offer every week for our Investor Update newsletter, so please get in touch to discuss these. Our team of experts can also go through other rates that you may be eligible for that can help to save you money in the long run, even if that means incurring Early Repayment Charges now.

Get in touch with one of our expert mortgage brokers to see what we can do to ensure that you can secure the best mortgage deal whilst you still can. Our consultants are ready to go through any issues you may have and are more than happy to help in any way they can. Submit an enquiry here, or call our team on 0345 345 6788 to get started.