Bank of England Hints at Rate Rise in “Coming Months”

The Bank of England (BoE) has said that higher inflation and a pick-up in growth could lead to a rate rise in “the coming months”.

Members of the Bank’s nine-strong Monetary Policy Committee (MPC) voted seven to two to keep interest rates on hold at 0.25%.

But the MPC was talking in much stronger terms about a rate rise, analysts said.

The pound climbed more than 1% against the dollar to $1.3363 after the BoE’s announcement.

The Bank’s Governor, Mark Carney, comments: “The majority of members of the MPC, myself included, see that that balancing act is beginning to shift, and that in order to… return inflation to that 2% target in a sustainable manner, there may need to be some adjustment of interest rates in the coming months.

“Now, we’ll take that decision based on the data. But yes, that possibility has definitely increased.”

In minutes of its latest rate decision, the MPC said there was a “slightly stronger picture” for the economy since its forecasts last month, thanks to signs of a firmer housing market, stronger employment, and a rebound in retail and new car sales.

The nine policymakers on the panel believed “some withdrawal of monetary stimulus was likely to be appropriate over the coming months”.

The Director of mortgage broker Private Finance, Shaun Church, comments on the latest news: “Over 2.2 million first time buyers have bought a home with a mortgage and benefitted from low mortgage costs since interest rates fell to 0.5% in March 2009.

“Although the BoE hasn’t raised rates this time around, the message is clear that consumers should be aware this might happen sooner than expected. When rates do eventually rise, it will be the first time over two million people have experienced this as a mortgage holder, and more rises are likely follow.”

He continues: “However, while today’s rock bottom mortgage rates can’t last forever, further base rate rises are likely to be gradual and mortgage rates won’t necessarily rise at the same rate. Healthy competition between lenders should ensure that mortgage pricing remains low for some time yet. Homeowners therefore have plenty of time prepare for a slight increase in pricing in the coming years.”

Ishaan Malhi, the CEO and Founder of online mortgage broker Trussle, adds: “With the BoE once again choosing to hold interest rates at 0.25%, anyone with a mortgage should be thinking about how they can take advantage of the situation. Borrowers should check what level of interest they’re paying on their mortgage and whether they could save money by switching to one of the more competitive deals on the market. Switching mortgage can now be done on a mobile in a matter of minutes, whether that’s on the bus to work, or waiting for the kettle to boil, and could shave hundreds of pounds off the average household’s monthly outgoings.

“Rock bottom interest rates offer the perfect opportunity for homeowners to overpay on their mortgage, increasing equity in their home and bringing down their debt. It’s easier than ever to stay on top of your mortgage, and the rewards for proactively managing it can far outweigh savings made by switching energy or internet provider. At a time when prices are rising and wages are struggling to keep pace, now’s the time to dust off that old mortgage statement and see what else is out there.”

We will keep you updated of any changes to interest rates at Landlord News.