The Bank of England has raised its base lending rate to 0.75% from 0.5% following an unanimous vote by its Monetary Policy Committee (MPC).
This is the first rise since November last year and the first time the bank rate has exceeded 0.5% since the dark days following the banking crisis when the base interest rate was reduced from 1% to 0.5% in early 2009.
Today’s announcement follows recent cheery economic reports including inflation that appears to be under control at 2.4%, improving economic output in the medium term and increasing employment.
This, the committee reasoned, was underlined by forecasted GDP growth of 1.75% this year and better than expected global demand for British goods.
But Brexit looms darkly in the background, the committee members recognise.
“The MPC continues to recognise that the economic outlook could be influenced significantly by the response of households, businesses and financial markets to developments related to the process of EU withdrawal,” its statement says.
Industry reaction
“We welcome the Bank of England’s small increase to interest rates today,” says Jack Ballantine (left), Director of Residential Development & Investment at Sotheby’s International Realty.
“Sterling’s value is now likely to increase, giving added confidence to foreign investors which is exactly what is needed following punitive tax changes and uncertainty around Brexit.
“The move further solidifies London’s economic stability and is unlikely to have a negative impact on house prices.”
Nick Leeming, Chairman of Jackson-Stops (right) , says: “Good things don’t usually last forever however and while the end of this golden period of great mortgage deals won’t be a surprise to the vast majority of prospective and current home owners, many have become accustomed to a decade of low rates.”
David Westgate (left), Group Chief Executive of Andrews Property Group, says: Now that this has been confirmed and given that it had been predicted for some time, it is very unlikely to cause any shock waves in the property market.
“We mustn’t forget that rates are still at a record low and have been for ten years. Indeed, we should remind ourselves that back in 2008, before the economic dip, the base rate was around 5%.”
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