The Bank of England has raised interest rates by a quarter of one percentage point to 4.25%.
The UK central bank’s monetary policy committee (MPC) voted to increase the base rate for an 11th consecutive time, following yesterday’s surprise rise in inflation.
The rate hike means UK rates are now at the highest level since October 2008.
Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: “There is a close call between change and no change – this latest rise in rates is a huge disappointment for the housing market as we were hoping the Bank would trust in its own data and leave well alone.
“Activity is slowly beginning to pick up after a very quiet last quarter of 2022 and the housing market is so important to overall economic prosperity. Of course, it is important to reduce inflation as far as possible in view of its impact on buyer confidence to take on debt. Overall, the economy still feels fairly weak as real incomes are falling so we would have liked to have seen at least one month without a rate rise.”
Adam Ruddle, chief investment officer at LV=, added: “The Bank of England’s decision to raise interest rates by 0.25 percentage points is in line with our expectations. The Bank is in a difficult predicament. On the one hand, inflation in February unexpected increased leaving the UK inflation higher than the US and Eurozone. On the other hand, there are some signs that previous increases are weakening the housing sector and hurting the economy; added to that, the recent banking turmoil is in itself a disinflationary pressure. We believe the Bank has sought to balance these considerations whilst remaining clear that managing inflation down is its key responsibility – even if that means subdued economic growth.
“While an increased rate helps tackle inflation it hinders economic growth, increases mortgage payments and squeezes living standards. This week’s figures showing a rise in inflation shows that rising prices remains a stubborn, and potentially domestic, problem. I believe the Bank may continue to raise interest rates to 4.5% over the coming months.”
