Last week the Bank of England increased the standard base interest rate by another 0.25% to carry the rate to a new high for the past 15 years at 5.25%. This has brought on more concern for homeowners coming to the end of their mortgage term or those that have already had theirs expire and have been moved to their lender’s standard variable rate (SVR) having forgone a remortgage choice. For those nearing the end of their term, those not on a fixed rate, and especially those on a SVR there are savings to be found with a remortgage.

The average house price fell for the fourth consecutive month in July according to Halifax. More expensive borrowing costs are being blamed for the decline in demand from home buyers. First time buyers are considering homes much smaller than two years ago when lender’s interest rates were at historically low levels. In some cases, they are putting their homeownership dreams on the shelf. The average house price dropped annually by 2.4%, and while that could have made property buying more affordable, any savings were erased by higher interest rates in mortgage offerings.

On Thursday, the expected occurred. The Bank of England’s Monetary Policy Committee (MPC) increased the standard base interest rate, which made this meeting the fourteenth consecutive gathering that resulted in a rate hike. The rate was raised by 0.25% to 5.25%, which was less of a surprise than at the last meeting in which the rate was more assertively raised by 0.50%. The current rate is now at a 15 year high, and while the rate was increased, the committee was divided about the action.

Finally, inflation seems to have let go of its stubborn grip and could be heading more rapidly toward the target rate of 2.0% than in months past. In June, the decline to 7.9% was hopeful as it could signal interest rates might not be increased as steeply as had been predicted. However, the change in the inflation rate will not slow down the efforts of the Bank of England’s Monetary Policy Committee (MPC) to tame inflation. Rather it is expected they will continue the assertive actions of past meetings to keep the momentum going. This could result in either a 0.25% or 0.50% rate hike to the Bank’s standard base rate of 5.0%. Either rate increase will take the base to a new high not seen in a decade and a half. 

The latest news on interest rates could be good or too optimistic. According to some experts, the peak rate is considered to be much lower than what was previously thought with an expected top rate of the Bank of England’s standard base rate of 5.75%. This is a positive switch from the previously expected rate of 6.50% and even with some experts forecasting higher and closer to 7.0%. The lower peak rate has come about due to inflation declining after being stubborn and barely budging with previous rate hikes. 

The countdown leading up to the next Bank of England’s Monetary Policy Committee (MPC) meeting has begun. Next week, the MPC will meet and decide on the state of the economy and discuss inflation. The result will be either another rate hike or allow the rate to remain steady. There is little to no chance of a rate cut. The expectation is for the rate to be increased by at least 0.25%, but more possibly 0.50% because while inflation has declined, it is still far from the target of 2.0%.