The Bank of England’s Monetary Policy Committee voted unanimously to keep interest rates on hold at 0.5% at their latest meeting but said if the current economy remains on track the speed of further rate rises could accelerate.
The Committee also voted unanimously to maintain the stock of UK government bond purchases, financed by the issuance of central bank reserves, at £435 billion.
Jeremy Duncombe, director, Legal & General Mortgage Club, said: “After repeated warnings that a rise in interest rates may come sooner than expected, borrowers will no doubt be relieved by today’s news to hold at the current level.”
Richard Pike, Phoebus Software sales and marketing director, said: “Although inflation edged back in December it is still 50% above the target set by the government.
“The MPC forecasts that inflation will remain at this level, at least in the short term, which puts more pressure on the bank to act.
“With this in mind, I expect to see a further base rate rise sooner than we would have expected at the end of 2017.
“A rise would clearly have an effect on mortgage rates for new and existing borrowers and so it will be interesting to keep an eye on movement in swap rates.
“Clearly, any upward movement will put further strain on indebted households and this could have a far wider effect on the UK economy in general.”
Some economists think the next rate rise could come as soon as May.
Simon Gammon, managing partner at Knight Frank Finance, added his analysis: “A mood of complacency on global stock markets came to an end this week. The magnitude of the crashes seen in New York, London and Tokyo shows investors are now factoring in rate rises in response to inflationary pressures across world economies. Anyone with a mortgage should take note. Financial markets have known the era of ultra-low rates was coming to an end but recent positive economic data has brought the reality home.
“In the UK, comparatively strong employment and wage growth data bolstered the arguments of those who believe rates will rise more than once this year. The recent rise in five-year swap rate points in the same direction. Despite the backdrop of Brexit and the fact the economic news is not exclusively positive, I still believe it is a reasonable assumption that rates will rise by 0.25% this side of the summer.”
Craig McKinlay, sales and marketing director at Kensington Mortgages, said: “Today’s decision means business as usual from the Bank of England. However, though the era of ultra-low rates isn’t over, with the Term Funding Scheme (TFS) set to end on 28 February it’s possible that we could see mortgage rates start to creep upwards.
“The TFS was put in place to ensure the 0.25% base rate cut was passed to borrowers and though the impact for most will be limited, borrowers should consider securing their mortgage rates now with a fixed deal.”
And Ishaan Malhi, CEO and founder of online mortgage broker Trussle, added: “We may not see another interest rate rise for a few months, but it’s looking like it won’t be long before mortgage rates begin to climb.
“Low interest rates and government subsidies have encouraged banks to lend, but the days of cheap credit could be numbered.”