Bank of England Doubles Interest Rate to 0.5%


Interest rates have been raised for the second time in three months by the Bank of England to 0.5% and warned that spiralling energy bills would push inflation higher than expected, to more than 7% by April.

There was division amongst the monetary policy committee was divided on whether to raise rates by 0.25% or by even more, with five members, including the governor Andrew Bailey, voting to increase rates to 0.5% and the other four opting for a bolder raise of 0.5% to 0.75%.

They reported the rise was needed to deal with “continuing signs of greater persistence in domestic cost and price pressures”.

Although the market had already priced in yesterday’s interest rate rise to 0.5%, analysts expect rates to hit 1% by the summer and 1.25% by the end of 2022.

This latest move is expected to drive mortgage rates upwards, putting financial pressure on households who are being hit with higher fuel and food bills.

However, industry experts point out that the mortgage market remains competitive with a number of attractive deals still on the market. It is not expected to dampen demand for mortgage products, particularly in the short term.

Rightmove’s director of property data Tim Bannister says: “The level of demand we’re seeing from home buyers at the start of the year suggests the rise in interest rates is unlikely to dampen the motivation to move.


“We’ve seen a real desire from both sellers and buyers to take action and move at the start of this year, and this is likely to outweigh the impact of an interest rate rise on house prices, at least in the short term.”  This jump in the base rate is likely to put pressure on lenders to increase mortgage rates. finance expert Rachel Springer says: “Mortgage rates are on the rise. This base rate rise may come as disappointing news to borrowers who are not locked into a competitive rate. Lenders are still launching attractive deals onto the market, so anyone who is still debating on whether to fix may be wise to do so now.”

However, Kensington Mortgages capital markets and digital director Alex Maddox adds that the market had been anticipating this increase, and this has been priced into the financial markets that dictate the price of many mortgage deals. As a result he says this latest rate rise may not result in an “instant feed-through to mortgage pricing”.

He says that lenders may use today’s decision to increase mortgage rates, making longer-term fixes a more attractive options for many customers.


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