Bank of England raises interest rates to 5.25 per cent

The Bank of England has announced a 25 basis point increase in the base rate, bringing it to 5.25 per cent. Marking the 14th consecutive rise, this decision follows better-than-anticipated consumer price inflation (CPI) data for June, which showed a decline to 7.9 per cent.

Within the nine-member Monetary Policy Committee, the decision was far from unanimous. Six members advocated for a 0.25 percentage point increase, two favored a more aggressive 0.5 percentage point rise, and one opted to keep the rate steady at 5 per cent.

The fixed rates of mortgages, being influenced by anticipated base-rate movements, are not directly impacted by this week’s decision. Indeed, lenders have already accounted for this increase in their fixed-rate pricing. Surprisingly, the recent stability in swap rates – which form the foundation of fixed-rate mortgage pricing – led several lenders to reduce their fixed rates in recent days. The previously observed extreme volatility in swaps seems to have settled in the wake of the latest inflation figures, and there is a possibility that others may follow suit in the coming weeks.

However, it is essential for borrowers to recognize that the era of rock-bottom pricing has passed. Those who are approaching the end of their cheap fixed-rate terms may encounter a significant payment increase, emphasizing the importance of proactive planning and timely action. To mitigate potential financial shocks, borrowers are advised to prepare well in advance and take necessary steps promptly.

One practical approach is to book rates up to six months before they are needed. Engaging with a reputable whole-of-market broker, such as Fitch & Fitch, can provide borrowers with valuable insights into the available options tailored to their specific needs. This prudent approach enables borrowers to explore the current market offerings and secure favorable terms.