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Bank of England rate has risen yet again

May 14, 2023

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It was inevitable. The UK Bank of England rate has risen yet again, now reaching 5.5%. After years of continuously rising house prices, and the base rate remaining static, this is now the fourth rise since September, with some analysts predicting rates will probably rise yet again in the near future to reach 5.75%.

The BBC claims that “Business and employers groups accepted that the latest rise was “necessary”, but added caution was needed in future so as not to slow UK growth too much.” however this is of no comfort to the millions of beleaguered mortgage holders.

The latest of the rises will be seen as good news for any savers who are not also weighed down by the growing tide of consumer debt, but for the majority of people, it will mean higher household bills.

The increase is set to add, on average, an extra £16 a month to a £100,000 mortgage on top of the previous 3 rises making it difficult for some houseowners to meet the rising costs.

According to Stephen Leonard, Director of Mortgages at Alliance & Leicester, the situation is not that bleak for most; “House price inflation is significantly down on last year, and the market is currently experiencing a cooling effect, as increased inflation, higher borrowing costs and the possible introduction of HIPs are all leading to consumers tightening their belts, taking stock of their finances and perhaps delaying their decision to buy or sell a property…..However, indications are that the rate may well be at the top end of the curve so borrowers needn’t panic.”

He did however acknowledge that many first-time buyers were feeling extremely vulnerable due to the current situation, however there are still options available. “First-time buyers should consider locking into a fixed-rate mortgage enabling them to have the security of regular payments, and allowing them to budget at a level they find comfortable and affordable. There are still deals on the market under 5.5%, and borrowers should act quickly if they want one.”

As landlords look to pass off the increases onto their tenants, and houseowners, feel the pinch on their mortgage repayments, it may be time to call in that long overdue lottery win in order to pay off the debts and start saving instead.

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  • Arkad

    Hey the Money Lion,Another quarter pc raise today takes the UK base rate to 5.75%. Do you think they will be raised any higher this year?I feel the rate may have peaked - I don’t think that the effects of previous increases have been fully realised yet - and I’m looking at putting some of my cash into some fixed-rate financial products. Any recommendations?ArkadThe Richest Man in Atherstone

  • the Money Lion

    According to several news sources, currently many smaller businesses seem to be looking relaxed following the rate rise, and are not expecting there to be another on in the near future. The housing market while slower than the boom period of some months ago, is still showing signs of continued growth. This may indeed be because previous increases have yet to be fully realised, however there are those on the margins who are struggling to make ends meet already. Possibly in favour of another rate increase, the BBC has quoted the Governments Monetary Policy Committee (MPC) stating that they have warned that “inflation remains a danger”, saying, “most indicators of pricing pressure remain elevated”.Some analysts have taken that to mean there may be a further rise this year.”Another predictor of a rate rise is The Item Club, an economic forecasting group, who expect interest rates to move up again to the 6% level, and then to stabilise. They believe that this should be enough to halt the excesses in the housing market. As this study group utilises Treasury data and economic models in order to evaluate the market, it seems that the official verdict appears to be that another prospective rise cannot be written off. However, at the end of the day, nobody can guarantee what the future is likely to bring, and the economy is influenced by many composite factors.Whether it is worthwhile taking on a fixed-rate or a variable financial product, depends on your own personal level of perceived risk. There are a great number of constantly changing products out there, and with them a large number of different levels and types of protection as well as potential financial returns options. In a constantly changing financial world your best bet is to do some research, try the financial aggregator sites - Moneynet.co.uk, MoneySupermarket, etc, to get some current pricing info, also check out information sites like MoneySavingsExpert.com to see what they have to say, and consider consulting an IFA for further advice and potentially some level of protection. That way you should know your way around the current market and be in the best position to take advantage of the current financial market.Good luck