22 Sep THE Bank of England is treading a “very fine line” with its interest rate hike
THE Bank of England is treading a “very fine line” with its interest rate hike, a leading UK property association warned today.
The National Association of Property Buyers said the decision to hike levels to 2.25% was “the last thing many homeowners wanted to hear”.
Spokesman Jonathan Rolande said: “The Bank of England is treading a very fine line between reducing inflation and causing great hardship to many hard working families.
“Make no mistake, many people across the UK will be dismayed by this news. It is the last thing around a third of homeowners wanted or needed to hear.
“With 1000 fewer mortgage products than a year ago, this is really a worrying time for
borrowers with an expiring fixed rate and new buyers alike.”
Mr Rolande said it makes tomorrow’s Government statement “all the more important”.
He added: “Anticipated tax cuts may ease the burden. And a targeted stamp duty reduction could also provide a much needed boost to the property market.”
Mr Rolande’s comments come as the interest rate was raised to 2.25% – the highest level since the 2008 financial crisis.
The move against inflation was less aggressive than financial markets had expected, but in line with the expectations of economists.
Market participants had widely expected the Bank to follow the US Federal Reserve last night with a 0.75 percentage point rise.
But the Bank signaled that the country could already be in a technical recession, saying that its staff now believed the UK was on course for a second consecutive quarter of negative growth.
It had forecast just last month that the economy would grow by 0.4% between July and September.
But it said that the additional Bank Holiday for the day of the Queen’s funeral could now contribute to a negative growth figure for the period.
The minutes of the Bank’s rate-setting committee contained one piece of good news; that the government’s energy bill support would now mean inflation not rising by as much initially expected in October.
It believed the consumer prices measure would come in at just under 11% from the current 9.9%.
Its last forecast predicted a figure above 13%.
The latest rate increase still places further intense pressure on borrowers, such as mortgage holders, as variable rates and new fixed-rate loans continue to head north.
The Bank’s action is aimed at tackling core inflation – which strips out more volatile elements such as petrol and energy prices – that is still on the rise amid the cost of living crisis.
The main consumer prices index (CPI) measure fell back in August but that was only thanks to fuel costs plunging in the previous month.
The bank is worried that other elements of inflation, spikes in the cost of goods and services more generally, are becoming more ingrained.
While any action to keep a lid on the pace of price rises will be broadly welcomed by the government, financial markets are likely to question not only the speed of the Bank’s tightening but also the Truss administration’s approach to stimulating economic growth through tax cuts and energy bill bailouts for households and businesses.
