MPC increases Base Rate

The move follows industry speculation the move would occur, and represents the highest level in six years.

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Jonathan Cornell, technical director at Hamptons International Mortgages, said: “With inflation last month reaching the highest it has been for 10 years and the Retail Price Index hitting 4.8 per cent, some banks are even predicting the possibility of the Base Rate reaching 6 per cent by Autumn.”

Adrian Coles, director-general at the Building Societies Association, said: “Consumers should not panic as a consequence of this rise, but should try to assess how it will affect their finances. For those on variable rates, the increase in the interest rate will see their mortgage payments rise.”

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Brian Murphy, head of lending at Mortgage Advice Bureau, admitted that the move might not cause a market slowdown, as predicted. He said: “While recent housing reports have reported a minor freeze in the rate of increase, the level of increase for house prices year-on- year continues to rise. Demand for housing is also still rife across the country.”

However, Lee Grandin, managing director of Landlord Mortgages, said: “The rise will come as a jolt for both buy-to-let landlords and their tenants.”