The Bank of England has raised interest rates to 3.5% from 3%, the highest for more than 14 years. Six members of the Bank of England’s nine-strong Monetary Policy Committee voted to raise its interest base rate from 3% to 3.5%.
However, two members of the committee – Swati Dhingra and Silvana Tenreyro – voted in favour of holding rates at 3%.
Another member, Catherine Mann, called for a firmer 0.75 percentage point increase, at the meeting held on Wednesday.
Colin Dyer, financial planning expert at abrdn said: “With undeniable financial pressure on cash-strapped households right now, another hike to interest rates will come as a further blow for borrowers battling to stand on two feet.
“The Autumn Statement did almost nothing to squash money worries for most, especially with tax freezes leaving some facing the prospect of higher tax bills for many years to come. On top of this, eye-watering inflation isn’t going to ease anytime soon, so those that are able to save must do what they can to protect their future finances.
“As we approach the costliest time of the year, many will be looking to make cutbacks. On top of this, those able to save or invest should seek to use all the tax reliefs and allowances available. Remember too that professional help is out there, whether you need support with bills and debt, or help with planning for your future finances.”
CEO of Alliance Fund, Iain Crawford, said: “The latest inflation figures suggest that the Bank of England’s aggressive tactics are starting to yield results, with the level of inflation falling marginally between October and November.
With this in mind, some may feel that a further festive hike ahead of the Christmas break is perhaps a tad Scrooge like. However, the economy is far from out of the woods just yet and so further temporary pain in return for longer term gain is the path we continue to walk.”
Director of Benham and Reeves, Marc von Grundherr, said: “There’s certainly no cold snap on the cards where interest rates are concerned with yet another substantial increase pushing the base rate to a 14 year high.
This will be as welcomed by homeowners as the proverbial lump of coal on Christmas morning, with those on variable rate products now facing yet another immediate increase in their monthly mortgage payments.
With many households struggling to heat their homes in these arctic conditions, this will be the last thing they need in the run up to Christmas.”
Managing Director of Barrows and Forrester, James Forrester, said: “A ninth consecutive increase in interest rates will do little to boost a weary property market that is already showing signs of wear and tear due to the higher cost of borrowing, with buyer demand falling and house prices now following suit.
While a Christmas interest rate increase is as desirable as a pair of socks from your aunty, the silver lining to today’s latest hike is that this should hopefully be the peak, with less chance of a further increase on the cards for 2023.
Should this be the case, the New Year should bring a far more settled outlook for the UK property market, as we adjust to a new normal following a turbulent few months.”
Managing Director of House Buyer Bureau, Chris Hodgkinson, said: “The Bank of England has chosen to pile on the financial pressure currently felt by many households for the benefit of the greater good. Unfortunately, the short term consequence of this decision will be thousands stretched even thinner due to the increased cost of their mortgage, with many more homebuyers choosing to sit tight and put off their purchase until 2023, at the very least.
This will mean more sales falling through and a further reduction in market activity, which is sure to bring a further decline in house prices. As a result, we can expect the downward trends that have already emerged in recent months to continue well into the new year.”
CEO of RIFT Tax Refunds, Bradley Post, said: "How Jeremy Hunt stole Christmas. Households across the nation are already facing the toughest Christmas in some time, with the cost of living crisis putting extreme pressure on the ability to heat their homes, let alone stomach the additional financial strain that festive season brings.
High levels of inflation have already pushed the cost of our Christmas dinner up by almost 20% since last year alone and we’re yet to see any meaningful reduction in these higher costs despite nine successive interest rate increases.
With many of us also utilising overdrafts, loans and credit cards to ensure the spirit of Christmas is maintained for our loved ones, higher interest rates will mean a higher cost when borrowing.”
