Mortgage borrowers will see more competitive loans being withdrawn from the market in the coming days, despite the decision of the Bank of England not to raise interest rates today.
The Bank of England’s monetary policy committee (MPC) voted seven to two in favour of holding rates at 0.1 per cent, contrary to widespread speculation. Two members voted to raise rates to 0.25 per cent.
If the committee had voted to raise rates, monthly mortgage payments would have increased almost immediately for about two million borrowers on variable or tracker rate deals — about one in four of all borrowers.
However, many fixed-rate borrowers looking to take out new loans or remortgage are expected to see their choice of competitive loans reduced anyway in the coming days after the MPC made it clear that interest rates would rise in the coming months.
Four of Britain’s biggest banks have already increased the cost of their fixed-rate loans for new borrowers, as they prepare for these future rises.
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Nationwide last night withdrew all of its tracker mortgages which follow the base rate and increased rates on some first-time buyer and remortgage deals by up to 0.35 percentage points. HSBC increased rates on 28 of its mortgage deals; NatWest announced rate hikes on several products by up to 0.15 percentage points; and TSB by 0.3.
● Bank of England holds interest rates despite warning on inflationhttps://www.thetimes.com/article/the-bank-blinked-on-rates-and-now-its-credibility-is-on-the-line-nsdshfwr0 https://www.thetimes.com/article/the-bank-blinked-on-rates-and-now-its-credibility-is-on-the-line-nsdshfwr0
● The Bank blinked on rates and now its credibility is on the line
The Bank of England said: “The committee judged that... it would be necessary over coming months to increase the bank rate in order to return CPI inflation substantially to the 2 per cent target.”
The minutes of the committee showed the bank held its nerve on rates today because most members wanted confirmation first from upcoming official figures that unemployment has not jumped markedly following the end of furlough support. The MPC also chose to hold the bank’s quantitative easing programme at £895 billion, but the vote was split 6-3.
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Experts suggested lenders would continue to make fixed-term mortgage deals less competitive, given the promise of future rises.
“Lenders have already been raising their cheapest mortgage rates in response, with very few products available at less than 1 per cent,” said Mark Harris, chief executive of the mortgage broker SPF Private Clients.
Myron Jobson, a personal finance expert at Interactive Investor, added: “The decision to maintain interest rates at current levels will come as a relief for mortgage holders who are on tracker deals – at a time where household budgets are being squeezed, with inflation pushing up the cost of essentials and rising energy prices intensifying the financial pinch.”
