The Bank of England (BoE) has increased the base rate by 50 basis points to 5% — its 13th consecutive rise. 

This is the biggest rise since February, and follows two monthly increases of just 25 basis points. 

The BoE’s Monetary Policy Committee voted 7-2 for this increase, with the remaining two voting to keep rates on hold.

This bolder move by the Bank of England is an attempt to dampen inflation, with the consumer consumer price index stuck at 8.7% — significantly higher than its 2 per cent target. Figures published this week also show that core inflation, which strips out volatile food and energy prices, is continuing to rise, and is now at its highest level for 30 years.

In its report the BoE said that previously it had forecast the base rate to average at 4% over the next three years. This has now been revised, due to rising gilt yields, that now suggests “a path for the Bank Rate that averages around 5.5%.”

Mortgage markets have endured another tumultuous month on expectations of a further rate rise, with a high number of products being withdrawn, often at a very short notice. 

This rate rise is in contrast to movements in the US, where the Fed announced it was keeping rates on hold last week, although it hinted further rate rises may be needed this year. 

Assured Sales spokesman Stuart Collar-Brown says: “It’s a scary time for those used to sub 2% rates with many homeowners finding mortgage costs are rise significantly when renewing.”

He says this has led to less movement in the mortgage market with “a growing disconnect between what a property is being valued by the agent, versus what a potential buyer is going to pay”. 

He added: “House prices will continue to decline and many buyers are unwilling and unable to commit to larger mortgages, so the only buyers with any bargaining power are the cash buyers.

“Sellers who receive an offer close to the asking price should seriously consider accepting it as those offers could be 5-10% less in the next three-six months.”

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