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Mortgage and Property experts react to BoE interest rate decision

Would they or wouldn’t they? 25 basis points or 50? Mortgage and Property experts have certainly been poised for the latest Bank of England MPC decision on UK interest rates which was released at midday today, 3rd August.

Market expectations were that the Bank would opt for a 0.25% hike, up from 5% which was announced last month, to a new UK interest rate of 5.25%. With similar increases in rates in both the USA and Europe recently, the UK follows suit in pursuit of the target to bring sticky inflation under control and towards the BoE’s 2% target.

Today’s hike is the fourteenth consecutive interest rate rise from the MPC and brings interest rates to their highest level in the UK for fifteen years.

However, the impact of lags – especially given the increased penetration of fixed rate mortgages – and recent news of softening inflation and property prices – are causing many to worry that a recession, which has been narrowly avoided so far, may be just around the corner.


Clearly there are particular concerns for people’s finances across the board given the cost of living crisis as well as for investment managers.

For mortgage professionals, these are particularly challenging times as the impacts of the cost of living crisis and pressure on the housing and mortgage markets continue to dominate day to day decisions and engagement with clients.

Mortgage and Property experts have been sharing their reaction to today’s interest rate news as follows:


William Scoular, Head of Private Client Lending at Investec Real Estate, said: “The Bank of England’s decision to hike rates by only 25 basis points indicates that the interest rate rise juggernaut could finally be running out of steam. There is growing evidence the inflation balloon is starting to deflate, as the bitter monetary pill UK consumers have had to swallow starts to take effect. The quicker this translates into an uptick in real estate transactions and new development starts, the better. 

“Despite the carnage of the past 18 months, most commercial borrowers have been able to manage their increased interest payments and whilst not thriving, they are surviving. For the sake of the UK economy, the hope is that this is where rates peak.”

Will Hale, CEO of Key, said:“Today’s 14th consecutive increase takes the Bank of England base rate to 5.25% which is a figure that was last seen in February 2008.  While inflation is starting to fall, prices are still increasing in real terms and this move will create an unwelcome additional expense for those mortgage borrowers who are stuck on variable rates or who are coming to the end of fixed term deals and looking to remortgage.


“For older borrowers trapped on a lender’s standard variable rate (SVR) this is a particularly worrying time. Ahead of this announcement the average SVR was 7.85% and there is no doubt that even with the Government Support Measures that some homeowners are going to be facing hard choices.  For those in retirement that typically have fixed incomes and for whom the current cost of living pressures are especially acute, the options can be limited and often not palatable.

“However, the positive news is that the product landscape in later life lending is evolving rapidly and the sector continues to step-up to meet this growing societal need. Rates in the equity release arena start from 6.01%, fixed for life, so now may be the right time for customers to consider whether there may be a different way to manage mortgage debt in older age. 

There is no silver bullet. Whether it be a lifetime mortgage or a retirement interest product, all choices come with risks as well as benefits. However, with modern equity release products now offering customers the ability to service some or all of the interest as well as having the embedded protections of a no-negative equity guarantee and surety of tenure, the combination of flexibility and safeguards can make this an option that can deliver good outcomes for a wide range of different customers.


“Speaking to a specialist financial adviser will help homeowners better understand all their options and make decisions that are appropriate for their individual circumstances.”

Paresh Raja, CEO of Market Financial Solutions, said: “That the base rate now resides above 5% is not in itself a significant issue; this was, of course, the norm before 2008. But the fact the jump up from a meagre 0.1% has come in a relatively short space of time (since December 2021) has offered borrowers, investors and businesses little time to adapt to higher rates.

“Positively, looking ahead, economists are suggesting the base rate may not rise as high or as quickly as once thought, and the rates available on products are starting to reflect that. Today’s hike shows that – perhaps counter-intuitively for borrowers, even though the base rate rose, there is some good news in that the jump was smaller than previously predicted, allowing lenders to reassess their rates accordingly. 


“But right now, flexibility and communication from lenders remains of utmost importance, helping both existing and prospective clients to borrow responsibly without pulling products out from under them or being too rigid in the terms of loans. The market will realign to a higher base rate in due course, but today’s latest hike from the Bank of England reaffirms that lenders must double down on a proactive approach to supporting property owners and property buyers who will feel the effects of it.”

Matthew Howlett, Research Executive at Opinium, said:As rates rise for the fourteenth consecutive time to 5.25%, the pressure continues to build for mortgage holders who are on or about to come onto variable rates. Opinium research has shown that 6 in 10 UK mortgage holders are already worried about making their repayments.

“There are a lot of factors in play for homeowners, including house prices, inflation figures, and competition among mortgage providers – and as yet, the UK public doesn’t see the situation as requiring Government intervention. Over half (52%) of UK adults oppose a taxpayer-funded bailout for mortgage holders. In fact, people are more in favour of the government giving more support to renters (47%) than to mortgage holders (36%).


“However, as the situation develops these attitudes may start to change. 1 in 10 (9%) of those who are struggling or may struggle with their mortgage payments but are not worried about covering them think the government will offer a bailout. A lack of Government intervention may start to grate as more people come off fixed-rate deals and a lack of available mortgages for first-time buyers depresses the housing market.”

Alexandra Loydon, Director of Partner Engagement and Consultancy at St. James’s Place, comments: “This is now the 14th consecutive interest rate hike at at 5.25″as the attempts to contain stubbornly high inflation continue, and there’s no certainty that we have yet reached a peak in rates.  Inflation is still almost four times the Bank of England’s official target and, while the rate is starting to reduce, progress is slow.  

“There are certainly signs that this is starting to hit home for many people, with higher interest rates putting people off spending but also not leaving them with sufficient spare resources to save instead, not least as the cost of living continues to rise. The aim of increasing interest rates is to reduce demand for goods and services and push prices down. However, if there is too much widespread pressure on people and businesses, and consumer and commercial borrowers, it could tip the very fine balance and edge the economy into recession, without significantly easing the cost-of-living crisis.


“Evidence that house prices are starting to fall in many parts of the country could well be a sign that more expensive mortgages due to higher interest rates is having an impact on house purchases, as well as for those with existing mortgages. Anyone on a tracker, standard variable rate (SVR) or variable mortgage will be impacted immediately in an environment where mortgage rates are already the highest seen for many years. The key is to check affordability and if you are nearing the end of your fixed term, shop around for the best rates, including with your existing provider.  Budgeting and planning to ensure you can keep up repayments are essential. 

“For savers, don’t assume your existing provider will pass on the higher rates, as many banks have been very slow to do so in the past. Shop around for the best savings deals and be prepared to lock up your money for longer to achieve the best rates. When it comes to credit, prepare not to overspend and only use credit cards and loans for spending if you know you can afford to pay it off.”

Stephen Gomez, Mortgage Adviser at Wesleyan Group, says:“For those re-mortgaging, it used to be the case that you could potentially get a better rate by switching to another lender.


“That’s now less and less the case. I’m seeing clients being offered very attractive rates by their lenders if they stay put. It will be worth speaking to your mortgage adviser and your mortgage provider to see what they might offer you before you decide to go elsewhere. 

“For people looking for new mortgages, recently lenders offering ‘good’ rates have been quickly overrun with applications and deals are withdrawn with little or no notice. Every time a good rate is taken off the market, borrowers then rush to the next best lender, creating a domino effect, and the same thing happens again. It all means that there’s likely to still be some volatility in the new mortgage market until we see a material reduction in inflation and interest rates stabilise. We are however starting to see some small rate reductions from lenders which is better news for borrowers.

“Those looking to secure a new mortgage should also bear in mind that the old ‘rule of thumb’ about lenders being willing to lend four or four and half times your salary doesn’t always hold true these days. Lenders now use a more sophisticated affordability criteria that can vary significantly from provider to provider and person to person so be prepared that you may be offered a lower amount than you thought. A mortgage adviser will know what lenders are likely to offer given certain circumstances, so seek their advice first to avoid disappointment.”


Becky O’Connor, Director of Public Affairs at PensionBee, said: “Today’s rate rise was expected, but that doesn’t make this bitter pill easier to swallow for millions of mortgage borrowers and renters with housing costs linked to a mortgage.

“Higher borrowing costs appear to be being passed on with greater speed than savings rate rises, so any household that has to face borrowing costs may be more likely to suffer than benefit in the near term, from ongoing rises. “With each passing rate rise, it’s becoming potentially harder for those with increasing mortgage costs or rent to find the disposable income to set aside for their future, either through their pension or other longer term investments, as they are forced to funnel more and more towards their housing bills. 

Adam Oldfield, chief revenue officer at Phoebus Software, says: “Today’s decision by the MPC will come as no surprise, but it will no doubt cause consternation for many borrowers.  Whether it was the right decision is questionable, especially when we saw the first dip in inflation last month.  Perhaps it would have been wiser to give the last rise more time to take affect?  It will certainly be interesting to see the results of the upcoming review of the bank’s forecasting and procedures and how that may influence the members going forward.

“Although there has been a spate of mortgage rate cuts recently, the general consensus will be that a base rate hike will surely mean an increase in mortgage interest rates.  Hopefully, the speculation of an increase will have been enough for people to take stock and look at their mortgage affordability and current spending to prepare for a potential increase in mortgage payments.  This provides opportunities for both brokers and lenders to look at their books and identify the most exposed borrowers.  The last thing that lenders need is a big increase in mortgage defaults and repossessions.”

Carl Parker, national director at Just Mortgages said:“Even with the positive news on inflation last month, the general expectation was that the Bank of England would continue its rate rising agenda. Last week’s news from across the pond of the Fed increasing its headline rate – despite the fact inflation was just 3% – further cemented this view.

“Thankfully the MPC mirrored the Fed’s call with only a 0.25% rise, rather than repeating its bumper rise in June. The hope is that because this was very much expected, it won’t spook the markets which is the last thing anybody needs. Even with the wider volatility, we are beginning to see some really positive signs. News of lenders improving rates – if only marginally for now, and a rise in transactions in June are both incredibly encouraging. 

“It’s further proof to brokers that there’s still a market out there. In addition to those looking to remortgage, there are those that are driven to move and will do so regardless of the headlines in the national papers and the decisions of the Bank of England. With independent advice and access to the whole of market remaining critical in such a climate, brokers must remain proactive. Utilising all the tools at the disposal will be key to not only getting in front of clients, but in supporting more complex needs and cases.”

Vikki Jefferies, Proposition Director at PRIMIS, comments:“The Bank of England’s decision to raise its base rate by 0.25% was to be expected given inflation stood at 7.9% in June, well above the target rate of 2%. It’s also likely that we will see further base rate rises to combat stubbornly high inflation, with many predicting that it could reach 5.8% by March 2024. Despite this, inflation has been easing gradually since October 2022 and is providing cause for optimism in the market. 

“Yet the fourteenth consecutive base rate rise will undoubtedly compound the financial pressure that many borrowers are experiencing amid the still prohibitive cost of living crisis. Industry players need to continue considering ways to address this in their support for customers, particularly now that the new Consumer Duty regulations are in force. By working together proactively to secure the best outcomes for their customers, lenders and brokers will be better equipped to navigate this period and help ease any concerns borrowers may have. 

“To help with this, advisers should capitalise on the support available to them. Networks offer invaluable access to crucial resources, products, technology and training which will enable them to secure the best solution for their clients’ mortgage and protection needs.”

Adrian Anderson, Director of property finance specialists says: “The base rate increase today by the Bank of England to 5.25% was expected. There appears to be hope on the horizon for mortgage borrowers as inflation, whilst still high, is slowing in pace and thus there is less pressure to continue to increase base rate at the pace we have seen.

“Many lenders have in fact already priced this interest rate increase into current fixed rate mortgage pricing which is already incredibly high hence I am not expecting banks to increase fixed rates further in line with today’s base rate announcement.   

“I remain concerned however about the ongoing affordability for many households with mortgages who are already struggling with the cost-of-living crisis. Today’s rate rise will certainly heap more misery on the circa 2.2m borrowers who are paying a variable rate mortgage.  

“The property market is incredibly fragile because borrowers are not prepared to saddle themselves with expensive mortgage debt. We therefore need to see some downward pressure on fixed rate pricing to install some confidence into the property market.”

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