The Bank of England’s Monetary Policy Committee (MPC) held their September meeting on Thursday. The decision concerning the possible increase in the standard base interest rate was expected to be watched closely. Though few felt the interest rate would see an increase despite rising inflation, the meeting was expected to reveal how strongly some members believed an increase would be needed sooner rather than later.

Inflation has far exceeded the target rate of 2.0% set by the Bank, and an increase in the interest rate would help keep it in check. However, there are unique circumstances driving inflation due to the global pandemic. Rather than move quickly, it is expected time will be allowed for a natural correction to the inflation problem as the pandemic comes under more control and the economy moves toward recovery. The Bank noted that while inflation is expected to rise to 4% or more by year end, it should reduce closer to the target rate by middle of next year.

Because there could be consideration for an increase to the current historically low interest rate of 0.1%, there is strong attention on the mortgage and remortgage lending market. If interest rates begin to rise, there could be a rush to buy in the housing market and a rush to remortgage. On the other side of the viewpoint, an increase in the interest rates could dampen the enthusiasm for buying in the housing market and cause demand to weaken. That would have a major impact on the economy as the housing market, while being surprisingly busy, has helped hold up the UK economy during the pandemic.

Not only are properties selling, but businesses connected with setting up or moving a household have been able to thrive during the pandemic. Off shoots of the same businesses that have flourished are those doing improvements and upgrades to existing homes of remortgaging homeowners. Even businesses that sell items to help one set up a home office, home study area, or home gym have done well despite the pandemic.

While rates might not have increased this month due to the unanimous vote by the MPC, nor the outlook appear that it will happen before the end of the year, borrowers should be ready to take action soon as the beginning of 2022 is deemed the target in which the lowest interest rate ever set by the Bank in its over 300 year history will finally begin to climb upwards as the world starts to truly pull out of the global pandemic.