The Bank of England recently increased its base rate from 0.5% to 0.75%, the highest rate in almost 10 years. Despite this, mortgage rates in the UK remain steady. This is due to the fact that the base rate increase has been largely offset by other factors, such as competition between lenders and a decrease in the cost of borrowing for lenders.
The Bank of England’s decision to raise the base rate was made in response to rising inflation, which has been driven by higher wages and increased consumer spending. The Bank of England’s Monetary Policy Committee (MPC) stated that the increase was necessary to ensure that inflation remains close to the target of 2%.
Despite this, mortgage rates have remained steady due to a number of factors. Firstly, competition between lenders has kept rates low, as lenders compete to offer the best deals to borrowers. Secondly, the cost of borrowing for lenders has decreased due to the introduction of new regulations, such as the Mortgage Market Review (MMR). This has allowed lenders to offer more competitive rates.
In addition, the Bank of England’s Funding for Lending Scheme (FLS) has also helped to keep mortgage rates low. The FLS provides banks and building societies with access to cheap funds, which they can then use to offer more competitive mortgage rates.
Overall, it appears that mortgage rates in the UK are likely to remain steady despite the Bank of England’s recent rate increase. This is due to competition between lenders, a decrease in the cost of borrowing for lenders, and the Bank of England’s Funding for Lending Scheme. As a result, borrowers should be able to take advantage of competitive mortgage rates in the near future.