MPC Doubles Down on Interest Rate Hikes

Michael Gove has released the government’s Levelling Up White Paper - what does this reveal about plans for the Private Rental Sector?

MPC Doubles Down on Interest Rate Hikes

By Sharfaa Kerkache, Trainee Solicitor at Woodstock Legal Services

A landlord’s

Just a few weeks after increasing interest rates for the first time since 2018, the Monetary Policy Committee has voted in favour of back-to-back interest rate hikes for the first time since 2004.

Interest rates rose to 0.50%, double the previous rate as the MPC pushed hard to tackle inflation.

What does this mean for the lettings industry? Let’s find out.

Interest Rates on an Upward Trend

Despite delivering back-to-back interest rate increases for the first time in nearly 20 years, the outcome could have been even more drastic.

The new 0.5% rate was decided by fine margins, 5–4, with each of the dissenters voting for a hike up to 0.75%.

The MPC next meets on May 10th. An interest rate of 1% by the end of the summer is a fairly feasible outcome if this week’s vote is anything to go by.

Time for a Fixed-Rate Mortgage?

Banking trade body UK Finance has reported that more than 1 million homeowners on standard variable rate mortgages will see their average mortgage repayment go up by around £15.96 per month under the new rate.

This affects the mortgage market. A base rate increase can cause big jumps in mortgage prices from one provider to another—each of whom gets to set their own rates.

Anyone paying a variable rate mortgage should take note, as it looks like this is the beginning of an upward trend for mortgage repayments.

Will the Lettings Industry Affected?

Landlords with higher mortgage repayments often respond by increasing their rents. However, this is difficult given the ongoing energy crisis.

Higher rents would mean longer saving periods for people looking to buy. Meanwhile, renters saving will benefit by putting money away before interest goes up.

This delicate situation means it is difficult to tell whether the private rented sector will be significantly affected in the coming weeks—but a prolonged period of rising rents and house prices may be upon us soon.

Closing Thoughts

Sustained inflation as a result of the pandemic and Brexit has forced the MPC’s hand to some extent, but their behaviour in the coming months will have a significant impact on landlords, renters and homeowners around the UK. Ensure your landlords are on top of their mortgage repayments, and point them in the direction of fixed-rate options if they want a more sustainable deal.

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