Bank of England raised interest rates for the 14th consecutive time, increasing its base rate by a quarter of a percentage point to 5.25 per cent. This hike, while smaller than the previous half-point 'jumbo hike' a month ago, indicates a slowing pace in Threadneedle Street's fight against inflation.
These new rates reach a 15-year peak, last seen in February 2008, reflecting a substantial rise over the past year and a half, contrasting with the 0.1 per cent rate of December 2021. Due to this change, about 150,000 borrowers with tracker or variable rate mortgages in London will immediately experience an increase in their mortgage payments.
However, for the majority of homeowners with fixed-rate mortgages, the impact will only be felt once their fixed terms conclude. Since many of these agreements were made during times of low-interest rates, the renewed deals will entail notably higher monthly payments.
Notably, analysts suggest that the latest hike was already anticipated and incorporated into the market's fixed mortgage rates. Consequently, the decision is unlikely to lead to a significant further increase in the interest rate for new fixed-rate deals.
In recent times, the MPC received a welcome development regarding prices, as last month witnessed an unexpectedly greater decline in inflation to 7.9 per cent. This marked a positive deviation after several months of higher-than-anticipated figures. Despite this, the current inflation rate still significantly surpasses the targeted level and ranks as the third-highest within the G20 nations.