Interest rate decision - May 2022

"We have already seen a significant rise in mortgage rates and Thursday's quarter per cent rise will add more financial pain for those on tracker rates as well as people coming off a fixed deal. For some, that may mean a doubling of their interest rates which, along with the current inflation crisis, means many people will face a very difficult time ahead. We are seeing more borrowers becoming interested in 7 or 10 year fixed rate deals, looking for that much needed long-term stability. For many, the frustration is that this further rise in the base rate will have little impact in curbing inflation."

"From an investment and macroeconomic perspective, there were no real surprises with Thursday's decision. As the direction of interest rates has been well signposted, the markets have priced in several rises this year. This latest rise will have little impact on the markets and it will not impact the advice we are giving our clients. We believe that investors will maximise returns by ignoring short-term monetary policy decisions and taking a long term perspective by maintaining a globally diversified investment portfolio."

"It is no surprise that the Bank of England has made the decision to increase rates further given the backdrop of raging inflation. The money markets have been pointing to this and are expecting further rises over the course of the next year. Whilst many borrowers will be protected because they have a fixed rate mortgage, there is a concern that rate rises, on top of the current cost-of-living crisis, will lead to some prospective borrowers having issues meeting affordability calculations in the future. The Bank of England have a delicate balancing act, as while it needs to be seen to be doing something, small rises alone will not be enough to curb the current cause of inflation, but could well help to tip the economy into a slowdown or even recession. On the other hand, there are a whole host of savers who will be delighted at the news, having played second fiddle to borrowers for a long time now. That's if the banks play ball and pass the rate increase on."

"This will not be last rise in rates we are going to see in the coming months, there are predictions that Bank Rate could rise to 2% by the end of the year. There will be many borrowers coming to the end of a fixed rate this year who will see mortgage interest rates possibly doubling compared to the rate they have been paying. We are seeing interest rates that many mortgage borrowers have not experienced and with financial pressures increasing on consumers from all angles there will be an increase in financial casualties, especially for those who are highly geared and have borrowed close to their maximum affordability."

"The increase in interest rates to 1% will, in effect, tighten the noose around the necks of business owners. Rising inflation, soaring operational costs, repayments of pandemic recovery measures, supply chain disruption, and now interest rate hikes will sadly force many firms into insolvency or restructuring. For financially sound and resilient businesses, opportunities will be created. Whatever the situation, it is critical that business owners seek help wherever they can and collaborate with a funder who will steer their recovery in both the short and long term. Now more than ever, businesses need access to solutions that address their financial challenges while enabling opportunity for growth. Our clients are already approaching us to seek the support they so urgently need, which is a clear indication of what is happening in the wider business landscape."

With many commentators expecting a hike of 0.5%, and indeed three of the nine MPC members voting accordingly, this is perhaps a more measured approach than expected. Whilst the Bank of England are concerned about inflation and keen to be seen to be taking action, they'll also have one eye on a potential UK recession as the cost of living crisis starts to hit consumers. They're treading a fine line, and will continue to do so until at least the end of the year.

"The Bank of England's interest rate is no longer zero-point-something but has finally clawed its way back up to 1%. This is hardly a surprise and to a degree we should be grateful that they didn't increase to 1.25%. Now we all watch and wait to see if it has the desired effect on inflation, or if we can look forward to further rises in the coming months. Spoiler alert: it's very likely we'll see more rises before the end of the year."

The Bank of England has increased rates to 1%, the highest level in 13 years. With inflation set to peak at 10% at the end of the year what does this mean for your household finances? Well, if you are on a variable rate mortgage, it's time to fix and quickly. Those currently on a fixed rate mortgage will not be affected, but borrowers coming to the end of this deal will be in for a shock when they come to remortgage. If you're close to the end of your current deal, you might want to consider a new mortgage deal now. You can usually lock in a mortgage deal three to six months ahead of the current end date. Speak to a mortgage broker now to review your mortgage and finances to ensure your cost of living is affordable to you. With economic growth now expected to slow, this could apply downward pressure on house prices, which won't be a bad thing for First Time Buyers. But with higher rates meaning more expensive mortgages, this will likely impact on the affordability of those currently house hunting. Independent whole of market broker advice is vital to navigating this difficult time we are facing. For those in later life who may be hit hard by the cost of living crisis, unlocking the cash in your property via equity release can be a good solution to ensure you can continue to enjoy your retirement."

"No surprises, rates are going up. If your have a tracker mortgage, the cost will increase. This will have an impact on the cost of living as a mortgage is normally the most significant outgoing."

"Working families are already feeling the squeeze with rising living costs, and utility bills are set to rise again later this year. This latest rate rise will mean anyone sitting on a variable rate or tracker will feel the effect immediately. Mortgage swap rates are also seeing increases so I don't expect fixed rates coming down anytime soon."