The base rate increases by 50 basis points to 1.75%

The Bank of England raised the base rate by 50 basis points, bringing interest rates to 1.75%.

It was the biggest rate hike since 1995 and the biggest increase since the central bank took control of the crucial decision.

At its meeting today, the Monetary Policy Committee voted by an 8-1 majority in favor of the increase.

The move is intended to help counter rising inflation, which the BOE predicts will reach 13% before the end of the year. She hopes to bring inflation down to 2% in two years – it stood at 9.4% in June.

This is the sixth time the MPC has raised the base rate since December 2021, the most recent being a 25 basis point hike to 1.25% in June.

Interest rates are now at their highest level since December 2008.

Last month, the BOE said it expects 40% of all mortgages to increase over the next 12 months.

Clare Beardmore, Legal & General Mortgage Club Broker and Proposal Manager, says: “After another UK base rate hike and with news of runaway inflation dominating the headlines, many homeowners will be worried about how this latest news will affect their monthly repayments or their ability to borrow.

“While it is important that the industry continues to monitor these signals, we must emphasize that these economic headwinds have yet to cast a shadow over the housing market. Buying activity shows few signs of slowing down and buyer demand remains high. Many consumers will feel little immediate impact and certainly those who opt for fixed rate products will not feel any impact on rates until the end of their mortgage contract.

“That doesn’t mean there isn’t work to be done, though. Borrowers of variable or trailing mortgages in particular will need reassurance and clear communication about what these changes mean for them. Advisors have a key role to play in interpreting these developments and explaining them to consumers, especially as the rising cost of living is forcing some borrowers to make difficult financial choices.

“For lenders too, this can be a difficult environment to navigate, and advisors will need transparency on product withdrawals or rate movements so we can ensure clients are still able to gain a foothold on housing scale.

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