August Rate Hold

The Bank of England decided in its August monthly meeting to keep rates unchanged at 5.75%. The MPC has apparently taken the decision to wait to further see the effects that the previous rises have before making another move, although it is widely believed that another rise is on the cards before the year is out.

Five previous rises in the base repurchase rate this year have seemingly failed to dampen consumer spending as much as expected, with the housing market in particular shrugging off these rate increases. There are early signs however that the successive rate hikes are beginning to take effect on the housing market, with house prices rising by less than one per cent for the fourth month running.

The consumer price index (CPI), a key measure of inflation, is still running above the 2% target, sitting at 2.4% as of the latest figures from June. Although this is down from the 3.1% it hit in March, many feel that the reduction is happening at too slow a pace.

Holding the rates will be a popular decision for those homeowners who are on a variable rate, as they have seen numerous increases over the past twelve months which have already added £80 per month to the repayments of a typical £100,000 mortgage.

Whether or not this marks the peak of this rate cycle remains to be seen, it will be in a large part dependant on the level of consumer spending over the coming couple of months as the CPI is a major factor taken into account for the MPCs’ decision. If the current levels of spending continue, and mortgage approvals follow suit then a rise to 6% would be likely.

THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE
REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT
OUR TYPICAL, VARIABLE RATE IS 11.2% APR. RATES RANGE FROM 7.4% APR to 27.60% APR
All loans subject to status in the UK to home owners aged 18 and over and may be secured on property.