Stand by for higher mortgage costs – Bank to decide on interest rates today

A significant number of analysts believe the Bank of England will increase interest rates for a third time in a row today, as its monetary policy committee meets this morning.

A increase today would take the level to 0.75 per cent and many anticipate another 0.25 per cent rise is set for May.

It’s now known that in February – when the rate rose to its current 0.5 per cent – four dissenting committee members voted for a higher increase, arguing that monetary policy should tighten faster, to “reduce the risk that recent trends in pay growth and inflation expectations became more firmly embedded.”

Only 6.8m homes in England now have mortgages, just 28 per cent of the overall market and about two per cent down from the level five years ago.

Research by mortgage firm Henry Dannell shows that the reduction in total homes owned with the help of a mortgage has been most notable in the East of England, down three per cent since 2017.

However, inflation is expected to surpass 7.0 per cent this year, and the widespread uncertainty as to the effect of the war in Ukraine, add to a pessimistic mood music surrounding the broader economy.

Savvas Savouri, chief economist at business consultancy Toscafund – which invests in agencies in the UK – has told Knight Frank:

“Households are sitting on £250 billion of excess savings compared to the start of the pandemic. House price growth has also created an extra £1 trillion in housing equity over the last two years.”

He expects the Bank of England base rate to end the year at 1.25 or 1.5 per cent as the current uncertainty leads to a slightly shallower upwards trajectory. However, he remains bullish in his outlook for the UK economy this year.

However, Chancellor Rishi Sunak – who next week delivers a financial statement which may include some tax measures – has issued an uncharacteristically downbeat warning about the economy.

He says that while the government’s “unprecedented support” for the economy during the pandemic suggests Britain is well-placed to get through the cost of living crisis, it needs to be recognised that Russia’s invasion of Ukraine “is creating a significant economic uncertainty”.

Kindly shared by Estate Agent Today

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