In a statement that brought some confidence back to the financial market and perhaps the housing market as well, the Bank of England’s deputy governor, Ben Broadbent, doubted the base rate would require a rise above 5%. There have been forecasts of the Bank of England’s Monetary Policy Committee (MPC) increasing the rate in the coming months to at least 5.25% or more. However, the damage to households at that level would be significant while dealing with inflation.

Mr. Broadbent remarked, “Whether official interest rates have to rise by quite as much as currently priced in financial markets remains to be seen.”

The statement, which was made only moments before Prime Minister Liz Truss offered her resignation, produced a reaction by the financial markets which reduced their predicted outcomes of the MPC rate hikes. There had been a major adjustment in the lending market once the government had announced the tax cutting mini-budget, and now while not completely reversed, there seems to be a possible ease in expectations of rate hike levels in the months ahead.

On 31 October, Truss’s new chancellor, Jeremy Hunt, is due to present a budget that will detail the plans for the government’s tax and spending policies. The Bank of England will then respond to the budget and policies during their meeting scheduled for 3 November. 

The budget will be interpreted on how much of an impact it will have on inflation. The forecast on inflation will then influence the MPC as to the level of interest rate hike necessary.

There had been some experts predicting as much as a one-point increase. The last two meetings of the MPC resulted in increases of 0.50% to the Bank’s standard base interest rate. There have been increases at each of the last seven consecutive meetings, with the last two seeing the steepest hikes.

Borrowers with large value variable loans have been hit hard with the increases. This includes homeowners, especially those that when their mortgage term end chose not to remortgage but be moved their lender’s standard variable rate (SVR). Now, many of those same homeowners have been racing the calendar to gain a remortgage before the next MPC meeting.

For homeowners that mortgaged during the first part of the pandemic when the MPC had lowered the base rate to all-time 300 year low, the interest rate shock is significant. Remortgaging homeowners could be coming from an all-time low interest rate to choosing from rates that are the highest in over a decade.

Experts encourage homeowners on a SVR or coming to the end of their mortgage term to shop for a remortgage online. It is fast and easy to visit the site of a remortgage lender and get a quote of a possible deal in hand to review. Visiting a remortgage broker could put numerous quotes in hand for comparing from a variety of lenders. Brokers could also have access to exclusive deals not found directly from a lender.

Of course, even those not at the end of their term could benefit from shopping for a remortgage. The quotes provide insight to availability. There are even some homeowners that choose to take on a penalty fee to end their term early to remortgage now rather than wait and face higher rates when their term is scheduled to end.

Inflation rose to 10.1% in September, which is over 5 times the Bank’s target rate of 2.0%. The odds for the MPC making a minimal increase to the base rate or foregoing a rate hike in November are very slim. Rate hikes are to be expected as long as inflation still grips the economy, and the Bank has said they will be aggressive in stalling inflation. 

While there are fewer experts expecting a full 1.0% increase to the base rate at the November MPC meeting, there is still likely it could be 0.5% as in September, or even higher as in 0.75%. Either way, homeowners might be facing rate levels that could cause significant financial strain to already strained household budgets.