Interest rates up again while inflation cools

Thursday 03 August 2023

The Bank of England has increased interest rates for the fourteenth time in a row to a 15-year high of 5.25%, with one local mortgage broker continuing to prefer non-fixed rate loans as interest looks likely to remain high for the foreseeable.

This comes after record low rates of 0.1% throughout the covid-19 pandemic.

People on variable rate or tracker mortgages will shortly see their monthly repayments rise again, while those looking to enter new fixed rate loans will also have to cough up more than before.

Some first-time buyers looking to enter the market through a lender may find themselves priced out of private purchase housing due to the latest increase. 

Landlords are also likely to pass on the cost to renters, with knock on effects for the buy-to-let market too.

The Bank of England has hinted that interest rates will remain “sufficiently restrictive for sufficiently long” despite a modest measured fall in inflation and projected further falls by the end of this year.

The UK Treasury says this plan should be stuck to so that inflation falls to previous average levels of around 3% and prevent a recession.

Pictured: Pierre Blampied also expects the base rate to remain well above levels seen prior to 2021.

Pierre Blampied, Managing Director of local mortgage broker SPF Private Clients, said he was expecting the 0.25 percentage point increase and so too was “the market”.

He expects inflation to come “under control” by autumn next year where he expects to see a base rate between 4% and 4.5%, following a “tougher year” in 2023.

Mr Blampied said there have already been indications of an increased number of people remortgaging, mostly through Lloyds, but the bank increased its rates earlier this week before the Bank of England announced its decision yesterday lunchtime.

“We continue to prefer tracker/discount rates based on the anticipated interest rate reductions in 2024,” he said.

“Interestingly Marsden Building Society currently offer a discount rate priced at 4.99%.”