Faced with a current inflation rate of just over 10 per cent, the Bank of England this week pushed up its interest rate by 0.75 per cent to 3 per cent.
This, it said, was the best tool it had for getting inflation back under control and down to its target rate of 2 per cent ‘in the medium term’. But it said the move had been made against the background of ‘a very challenging outlook for the UK economy’ and continuing uncertainty.
What happens next on interest rates ‘will depend on what happens in the economy’, said the Bank. It expects that to suffer in the next few months, but inflation to rise less sharply than at one time feared. A rise to 11 per cent in the last quarter of 2022 is now forecast, with a reversal of the upward trend from early next year. Sharp falls in the rate of inflation are expected from the middle of next year.
In the meantime, mortgages are certain to get more expensive.
‘Financial conditions have tightened materially’, said the Bank.
Its central projection ‘incorporates a tightening in credit conditions. However, the sharp tightening in mortgage availability seen during late September is not assumed to persist’.
However, ‘mortgagors are likely to face materially higher interest payments either now or over the next year. Borrowers on floating rates, which make up around 20 per cent of mortgages, will already be experiencing higher mortgage repayments due to the pickup in Bank Rate. Existing mortgagors on fixed-rate products, which make up around 80 per cent of outstanding mortgages, will face a rise in mortgage repayments at the end of their initial fixed-rate period’.
Around a quarter of the outstanding mortgages, just over 2m in total, will reach the end of their fixed-rate term between now and the end of next year.
- The Mortgage Works has reintroduced its range of tracker buy to let mortgages available for purchase and remortgage. Rates include a two-year 65 per cent LTV tracker at 0.64 per cent above Bank Base Rate (with a £1,995 fee) and a two-year 75 per cent LTV at 0.74 per cent above Bank Base (with a £1,995 fee).
