The Biggest Bank Rate Rise for 27 Years Podcast

Published 10th of August, 2022

This week I spoke to Iain McKenzie the CEO of the Guild of Property Professionals about the impact of the biggest Bank Rate rise for 27 years. 

In the Bank Rate podcast we discuss: 

What is the Bank Rate,

What the increase in Bank Rate means for the housing market, 

What it means for house prices,

What it means for monthly mortgage payments, and

the current temperature of the UK housing market

What is Bank Rate?

Bank Rate is the single most important interest rate in the UK. In the news, it's sometimes called the ‘Bank of England base rate’ or even just ‘the interest rate’.

The Bank of England's Monetary Policy Committee (MPC) sets Bank Rate, and it forms an important part of the action the Bank of England takes to o meet the target that the Government sets the Bank to keep inflation low and stable.

Bank Rate determines the interest rate the Bank of England pays to commercial banks that deposit money with the Bank of England. It influences the rates those banks charge people to borrow money or pay on their savings.

What the increase in Bank Rate means for the housing market?

The Bank of England hopes that the increase will take some of the heat out of the housing market, which means slowing down house price growth and reducing the level of activity in the housing market to reduce the risk of the housing market overheating. 

What does the Bank Rate increase mean for house prices?

The rise in Bank Rate increases the cost of borrowing, the monthly payments for borrowing a given sum of money will increase. As an example, if you were borrowing £100,000 and your mortgage rate moved from 2.5% to 3.0% your monthly mortgage payments (for a 25-year repayment mortgage) would increase from £447 to £472 per month, an increase of £25 per month

What does the Bank Rate increase mean for my monthly mortgage payments?

We believe that the rise in Bank Rate will feed through to mortgage rates. Bank Rate Tracker mortgages will increase immediately by 50 basis points (ie if you were paying 2.0% you will now be paying 2.5% and we expect most Banks, Building Societies and other mortgage lenders will increase their mortgage rates in September by the amount of the Bank Rate rise. 

However, those currently on fixed rate mortgage deals will not see their mortgage rate or mortgage payments change until the end of their fixed rate period.

The current temperature of the UK housing market

Listen to the podcast to see if you will be needing shorts and shades of a scarf and gloves...

Housing Hailey

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