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Will the Base Rate Increase Again Next Week?

Will the Base Rate Increase Again Next Week?

Ahead of next week’s Monetary Policy Committee (MPC) meeting, what do the experts predict for the Base Rate, and how will our new Prime Minister make her mark on the economy?

This year alone, we have seen five Base Rate rises from the Bank of England, with the latest taking the Base Rate to 1.75%. In an ongoing attempt to curb inflation levels, currently at 10.1% compared to the target of 2%, the MPC are preparing for their meeting on the 15th of September 2022 to again discuss the necessary measures needed to support the economy.

Our latest predictions

We expect to see another Base Rate rise next week, with an increase of 0.25%, and a further 0.25% in November. This would take the Base Rate to 2.25% by year-end, a significant jump from the 0.5 % we started 2022 with. Some other industry experts predict a more aggressive  increase of 0.5% this month, and 0.5% in November, so it’s a waiting game now to see what the Bank of England decides.

At the start of the year, predictions saw inflation peaking in April at the 8% mark. We’ve since seen levels surpass and hit a 40-year record of 10.1% in July, and forecasts now expect to see the UK inflation rate peak in early 2023 at 18%. However, the Bank of England remains certain that inflation shall be around the 13% mark at the close of the year.

Why are inflation levels still on the rise?

It’s important to be aware that the reason inflation continues to rise is not due to frivolous spending on the public’s part, as many are already feeling the pressure of the ongoing cost-of-living crisis. Instead, external factors continue to hike up record levels of inflation, including energy prices and the Russian war against Ukraine. Many grow increasingly concerned for the months ahead, as Ofgem recently announced the increase in the energy price cap from October, and Russia indefinitely cut off their gas exports to Europe. Both factors threaten to push more pressure onto inflation levels, and all eyes are now on the new prime minister, Liz Truss, to set out her plan to support people through the coming winter.

As Liz Truss begins her new role, we are sure to learn more about what policies and actions she intends to take around inflation and the Bank of England Base Rate. In her manifesto, the former Foreign Secretary argued, “we haven’t been tough enough on the monetary supply”, with more action needed from the Bank of England to tackle inflation levels. With further pressure on the Bank of England, we’re yet to know what support will be put in place for landlords and property investors navigating higher mortgage interest rates at this time.

What does this mean for the property market?

These Base Rate rises have made the rest of the mortgage market erratic, with lenders frequently withdrawing and increasing product ranges to maintain service levels and profitability, making it all the more stressful for our clients. There’s no longer a grace period for clients to consider offers, as many have experienced the true costs of delaying their mortgage applications. SWAP rates have also felt the impact and have increased significantly recently. The last month saw five-year SWAPs rise from 2.2% to 3.3%, their highest level since 2016. As the rate at which financial institutions pay each other, SWAP rates are equally as important as the Base Rate to property investors.

All the above can feel daunting and overwhelming, especially for property investors looking to boost their portfolios. Despite these factors, which are all important to keep in mind, the demand from tenants for new properties continues to soar. With rental prices rising due to demand, landlords can maximise on their investments at the moment.

Getting your properties in the right place to benefit requires the right property finance, and with interest rates on the incline, now is the time to speak to an expert broker to see what options you have. Mortgage rates will continue to rise, so we once again urge you not to delay. Call us on 0345 345 6788 to discuss your next steps, or submit an enquiry here.