Should the Bank of England increase interest rates today? advisers and mortgage brokers give their verdicts

by | Dec 15, 2022

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It is widely anticipated that, in their pursuit of trying to curb double-digit UK inflation, the Bank of England’s MPC will today decide to hike interest rates by a further 0.5% to 3.5%. If they do so, it’ll be the ninth rise this year. But, ahead of the announcement at midday today, what do advisers and brokers think should be happening?

Here are just some of the views being shared about what might happen to interest rates today, via the PR Platform Newspage this morning:

According to Riz Malik, Director at R3 Mortgages “Rates should not be going up today but they will as everyone seems to be asleep at the wheel of UK Plc. Inflation is already decreasing and will continue to do so in 2023 and 2024 according to the Bank of England’s own forecast. Rate increases are going to disproportionately affect the least well-off in society and do little to speed up the decline in inflation. People still have to consume a minimum level of goods and services just to survive.”

Lodestone Mortgages and Protection’s Craig Fish agrees with Malik as he comments: “While I expect the base rate to rise by 0.5%, I do think that this is the wrong decision for today. Inflation has dropped based on the latest numbers, and whilst it’s still way off target, we are in recession and what’s needed is for the economy to be stimulated. This inflation is caused by factors way beyond our shores, and raising interest rates is going to do nothing apart from stifling growth. People are genuinely struggling, not spending money. If it were me, I’d be waiting until January, looking at the numbers from December and then making a decision in early February.”

Mather and Murray Financial’s Samuel Mather-Holgate isn’t convinced that hiking rates will help saying: “The Bank of England has a mandate to keep inflation to 2% so feels it has no choice but to raise interest rates, but in reality this will make no difference in getting us back to target. By May, inflation will be very close to target once the shock effect of the war in Ukraine had on our energy bills is 12 months old. Domestic inflation will be negative by then as the economy will have crashed and stayed down. All the central bank is doing by increasing rates is making it more difficult for homeowners at a time when energy bills are already putting immense pressure on them. Increased energy bills and higher tax burdens are shrinking disposable incomes, doing the Bank’s work anyway, so there is no need to go further. All the Bank is doing is putting itself into a corner meaning it will have to cut further and faster in the Spring.”

 

Graham Cox of Self Employed Mortgage Hub isn’t buying into the argument that inflation was entirely due to supply chain shocks . “There was also a huge increase in money supply during the pandemic,” he says, “And once the economy re-opened, there was too much cash chasing too few goods. Raising interest rates was always necessary to protect Sterling against other currencies, particularly the Dollar. If we hadn’t done so, the Pound would have plummeted against the greenback, probably below parity. This would have been hugely inflationary given oil and gas are priced in dollars on international markets. That said, if inflation has peaked, it’s possible today’s Bank of England base rate hike is the last we see for some time.”

Lewis Shaw of Riverside Mortgages believes that a rate hike will go ahead today as he comments: “The Bank of England are stuck between a rock and a hard place. Do nothing and they’ll be condemned by the Tory party who’ll seek to blame them for not controlling inflation even though anyone with a single brain cell knows the type of inflation we have is imported from external shocks and not demand/pull inflation. On the other hand, the only tool they have at their disposal to control inflation is to pull on the base rate lever so what are the alternatives? So should they raise rates? No. Will they? Absolutely.”

Ironmarket’s Wes Wilkes also believes that rates will rise today as he explains: “The BoE has to raise and should raise Bank Rate, it’s their only weapon. What we can’t forget, though, is that it’s a problem entirely of their own making. Like the US Fed, they didn’t pay attention to inflation properly and are so far behind the curve that it was already out of control, meaning rate rises had to be more aggressive and more frequent. As the economy is a lagging indicator, it will inevitably lead to recession and I wouldn’t be surprised to see them cutting rates in late 2023.”

 

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