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Bank of England Maintains Interest Rates Amidst Economic Uncertainty

Today, the Bank of England opted to keep interest rates steady at 5.25%, marking the sixth consecutive hold following a streak of 14 consecutive increases since December 2021.

This decision, made by the nine-member panel, saw seven members advocating for a hold, while two proposed a rate drop. Inflation, the gauge of price rise, has exhibited a gradual decline at 3.20% for the year ending in March.

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Interest Rates held at 5.25%

After 14 consecutive base rate rises, the Bank of England have left interest rates unchanged at 5.25% for the first time since November 2021.

The decision by the Bank of England to leave interest rates unchanged represents a significant development in the country’s monetary policy. In this article, we provide our analysis of the situation

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What is the Mortgage Charter lenders have signed?

Chancellor Jeremy Hunt has announced a new Mortgage Charter, which has been signed by 32 lenders, will provide reassurance to 1.4 million homeowners who may face challenges with the new remortgage deals they are expected to transition to this year.

In light of the increasing mortgage rates, these lenders (who represent 85% of the market) have agreed to new commitments to support borrowers during this difficult period.

The lenders have made the following agreements:

  • Borrowers will not be forced to leave their homes without their consent, unless there are exceptional circumstances, for at least a year after their first missed payment (from 26th June).
  • Customers approaching the end of a fixed-rate deal will have the opportunity to secure a deal up to six months in advance. They will also have the ability to manage their new deal and request a similar improved deal with their lender until the start of the new term, if one is available (from 10th July).
  • Customers who are up to date with their payments can choose between switching to interest-only payments for six months or extending their mortgage term to reduce their monthly payments. Customers will also have the option to revert to their original term within six months by contacting their lender.
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Interest Rates increased to 5.00%

The Bank of England has risen interest rates for a 13th consecutive time as it continues to tackle rising prices.

Experts were predicting a slight fall in inflation figures in May, but official data on Wednesday showed inflation was still stuck at 8.7% in May, due to increased prices for second-hand cars, flights and supermarket food prices.

The Base Rate of 5.00% is the highest the UK has seen since 2008.

Just one month ago experts were predicting we were nearing the end of rate rises, but the rhetoric has changed as base rate could now reach 6.00% – a figure not seen since the 1990’s.

Thameside Mortgages Managing Director, Andrew Sheen pointed out “a fundamental role of the Bank of England is to control inflation. It’s painfully obvious increasing rates has been an ineffective tool against inflation.

“Rather than stubbornly sticking to the same methods, they should take a moment to pause and consider a different approach before causing significant harm to the economy and people’s livelihoods.” 

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Bank of England Increase UK Interest Rates to 0.25%

The Bank of England have voted to raise the UK interest rate from 0.10% to 0.25%, which is likely to have an impact on UK mortgage rates.

The Base Rate has previously been held at a record low 0.10% since the pandemic started in March 2020, but has been increased today amid growing pressures under the high UK inflation rate, caused by a surge in consumer prices, high energy costs and significant labour shortages.

The UK Inflation Rate target is 2.00% but was 3.10% in September and surged by 5.1% in the 12 months to November. 

“It seems mortgage lenders were anticipating this rise as we’ve seen a quite a few mainstream mortgage lenders withdraw their sub-1.00% mortgage deals in the last few weeks“.

Andrew Sheen, Managing Director.

Does Rising Inflation Need To Be Dealt With?

The Monetary Policy Committee (MPC) is tasked with ensuring inflation does not rise above 2.00%. If Inflation rises above 3.00% (or as low as 1.00%), the Governor of the Bank of England, Andrew Bailey, has to write to the Chancellor, Rishi Sunak to explain what he’s going to do about it.

Raising UK interest rates is a difficult decision to make. If they increase too much, it can stop the economic recovery and even cause a recession. The Bank of England hesitated to raise rates prior to today, in the hope that the rising inflation was short lived.

A number of factors have led to the rise of inflation, such as shortages in raw materials, increased consumer demand, lack of labour/workforce (including logistics/transportation).

While inflation was almost zero at the beginning of 2020, it rose sharply to 3.20% in August, before falling back to 3.10% in September.

The main reason behind increasing interest rates is to make it more expensive to borrow money – great for savers, but not for borrowers.

What does this mean for UK mortgage rates?

We’ve already seen the sub-1.00% mortgage deals disappear over the last few weeks. According to Defaqto, there were 82 sub-1.00% mortgages available, but as of 2nd November, that number dropped significantly to just 22.

However, there is still time to secure a great deal as Interest rates are still significantly lower compared with previous years.

If you have a fixed rate mortgage, you can still secure a new deal with 6 months remaining on your fixed rate. While your existing lender is not likely to offer you a new deal until there are 2-4 months left, we can secure a deal ready for when your fixed rate expires.

We strongly believe that obtaining professional advice is key to finding the right deal for you, so why not reach out to see how we can help.

You can call us on 03455 120 125, email us at or live chat with one of our team.

Post from Thameside Mortgages

A mortgage is a loan secured against your home or property. Your home or property may be repossessed if you do not keep up repayments on your mortgage or any other loan secured on it. The Financial Conduct Authority does not regulate most forms of buy to let mortgage.

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Is the Media Sensationalising Again?

On 31st March 2020, we read an article from the BBC titled ‘UK mortgage market goes into lockdown’, which stated that “Nationwide, one of the UK’s biggest lenders…has effectively pulled out of new lending, only offering mortgages to those who have 25% deposit/equity or more….which rules out First Time Buyers”.

We felt this article creates the very panic everyone in my industry is trying to avoid and leaves people wondering if this is due to Nationwide predicting a huge slump in house prices.

While we cannot guess what will happen with UK property market, we can explain the reasons why mortgage lending is becoming more restrictive directly as a result of the lockdown.

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