Bank of England hikes interest rate to 4% – Mortgage Strategy
The Bank of England has increased the interest rate by 0.25% to 4% as expected by markets.
This is the first hike since August 2023. Prior to today, the bank has held the rate at 3.75% for six consecutive meetings.
At the MPC’s September meeting, three of its nine members voted to raise rates to 4%, while six backed keeping them at 3.75%.
Energy costs continue to push inflation well above the Bank of England’s 2% target. The latest figures from the Office for National Statistics (ONS) showed inflation increased to 3.5% in the 12 months to September.
Commenting on the increase, John Charcol mortgage technical manager Nick Mendes says: “The Bank’s decision to raise Bank Rate by 0.25 percentage points to 4% was a precautionary move rather than a sign the economy was overheating.”
“With inflation rising and expected to climb further early next year, the MPC chose to act before higher energy costs could feed into wages and wider prices.”
Mendes adds: “What matters most now is how markets read the Bank’s message. If the rise is seen as a one-off precaution, swap rates could ease and lenders would have room to keep cutting fixed rates. If it is seen as the start of a series of increases, the recent improvement in mortgage pricing could stall.”
