Brian Murphy, Head of Lending at Mortgage Advice Bureau said.
“The decision to raise the base rate by a further quarter point this month will come as little surprise to City analysts and consumers alike. Inflationary pressure is still higher than desired and reports last week showed a marked increase in house prices compared to last month. Analysts predict there will be another rise by the end of the year and consumers are continually made aware of the ever upward trend of interest rate.
“However, while a further rate rise may come as no surprise; to many mortgage borrowers it should be ringing alarm bells. The base rate has now reached a potential tipping point and this month’s rate rise may indeed be the final straw to break the camel’s back for some mortgage borrowers.
“Although demand will continue to outstrip supply in several areas of the country and house prices will continue to creep ever higher, many first time buyers and novice landlords will begin to feel the bite of a further rate rise. An increasing number of first time buyers will start to find it almost impossible to reach their dream of owing a property and rental incomes will come under further pressure to support mortgage repayments. As this bottom rung of the market is removed the knock on effect will then be felt by sellers and could in turn prove potentially detrimental for the market as a whole.”
Mark Blackwell, Head of Corporate & Specialist Lending at Cheltenham & Gloucester (C&G) commented::
"This month's vote must have been a close call. Some MPC members probably wanted more proof that another rate hike was necessary, while others believe the MPC has been too slow to raise rates. On balance they've made the right move in opting for a rise now.
"While the economy is showing some tentative signs of a slowdown, house prices surged again last month and gross mortgage lending remains resilient, partly driven by borrowers refinancing loans.
"There are also those on the MPC who argued that the longer rates are left on hold, the higher they will have to rise before they finally peak. This may or may not to be true - but it is safe to say that with today's decision the Bank Rate has plateaued for the time being. The financial markets are looking for at least one further rise - but it could be spring next year before we see another move, and that move is more likely to be down than up."
Jonathan Cornell, Technical Director at Hamptons International Mortgages, added:
“The MPC’s decision to raise the base rate this month will feel like another nail in the coffin for many borrowers, with very little breathing space since May’s rate hike. However, with the Governor of the MPC outvoted on increasing the rate by a quarter point in June, borrowers must take what little consolation an extra month’s stall in increases offered.
“With reports last week highlighting increasing house price inflation in June it comes as little surprise that the Governor has this time convinced the rest of the MPC committee that the time has come for a further rate increase. However, with over half of City analysts predicting that the base rate will reach 6% by the year end it seems further misery for borrowers is yet to come.
“Increases to the base rate raise the mortgage rates offered by lenders and push the standard variable rates even higher. Borrowers who haven’t acted in this two month stall will now be very hard pushed to find a ‘good’ fixed rate mortgage equivalent to those of the past few months.”
