Bank Of England – 12th consecutive rate rise 4.25% to 4.50%!
Bank of England Hikes
This year the Bank of England (BOE) has increased it’s rates 12 times from an all time low of 0.1% in January 2022 to a whopping 4.50 today (15 year all time high), raised by 0.5% from 1.25% to 1.75% equating to the largest rate hike in 27 years. The Bank of England chose to increase interest rates by 0.5% from 1.75% to 2.25% back in September and the continual illusion it has been introduced to curb inflation is debatable…
In the December meeting the BOE opting to hike the rate by a massive 0.5% increasing the current rate from 3.00% to 3.50%.
Subsequently in the February meeting the BOE opting to hike the rate by a massive 0.5% increasing the current rate from 3.50% to 4.00%.
Apparently food costs have increased inflation beyond 10% spurring the Bank of England to hike rates further from 4.00% to 4.25% (7-2).
Today with inflation still beyond 10% spurring the Bank of England to hike rates further from 4.25% to 4.50% (7-2).
It seems the invasion of Ukraine by Russia is still being blamed for spiralling fuel costs and energy prices. Using the government calculated inflation figure has dropped to 9.4% in Febraury 2023. The true inflation figure can be calculated simply by looking at the increased cost of consumer outgoings…
The Bank of England has raised interest rates for a twelfth successive time, with the recent hike taking us to a 14 year all time high!
Industry experts estimate that over 40% of mortgages will go up over the next year, so more people will be forced to make higher monthly payments.
According to the BoE, a homeowner with a £250,000 tracker mortgage on a 25-year term will be paying an upto an extra £300 a month after the last these recent rate hikes.
UK inflation is still at a high of 9.2%, with the Bank of England predicting this would be as high as 13% by the end of the year, which is well above its 2% target, this doom and gloom is expected to remain elevated throughout 2023.
As the central bank battles a slowing economy, the ever-tightening cost of living crisis and rampant inflation, here’s how that affects your mortgages and house prices.
Mortgages
Analysts say the Bank’s move to hike rates by 175bps will continue to “pile more misery” on over 2 million people with variable rate mortgages as they battle the rising cost of living.
Central banks around the world have put up borrowing costs to bring down inflation. The European Central Bank recently raised its main interest rate by 0.25 percentage points and US Federal Reserve has rapidly raised rates to a range of 5.00% to 5.25%.
Most economists support such efforts to bring down inflation, but there are growing calls for restraint as economies head for recession and unemployment levels rise, depressing business and consumer spending without the need for further interest rate rises.
Debt charities urged the government to provide further subsidies for low-income households after an increasing number had turned to high-cost credit to keep afloat. The increase in borrowing costs will push up mortgage costs will naturally push up rental costs where the property is owned by landlords.
In addition to raising interest, the MPC also signalled that it would tighten policy accelerating the unwinding the money-creation process known as quantitative easing.
Between 2009 and the start of the pandemic in 2020 the Bank bought £895bn of government and corporate bonds in an attempt to support the economy but is now planning to sell bonds at a rate of £10bn a quarter over the next year.
Further rate rise in June?
Financial markets have pencilled in a potential 25bp (0.25%) hike in June, with some predicting a pause after that.
What are your thoughts on the continual Bank of England rate hikes? How are you being affected?