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Mortgage Rate Rise May Be Less Than Expected

The actions and intentions of the Bank of England have seldom been under more scrutiny than in the recent economic maelstrom. While much of that has focused on the intervention undertaken to shore up the gilt market after the swiftly-abandoned mini Budget of September 23rd, the Monetary Policy Committee’s (MPC’s) policy of raising the base rate represents a longer-term policy.

With several increases in the base rate over the last year taking the current level to 2.25 per cent, first time buyer mortgages in Liverpool and elsewhere have been increasingly costly. Moreover, many lenders have responded to the recent economic troubles by withdrawing mortgage products.

The markets have anticipated another significant rise in the base rate when the MPC next meets on November 3rd, but the deputy governor of the Bank of England Ben Broadbent has suggested the increase may not be so high, comments that may be noted by those seeking to get on the property ladder.

He told students at Imperial College London: “Whether official interest rates have to rise by quite as much as currently priced in financial markets remains to be seen.”

At the same time, that does indicate the November meeting will bring a rate rise. However, it would be surprising if that were not the case. At the last meeting, five of the nine members voted for the 0.5 per cent increase. Of the others, just one wanted 0.25 per cent and three voted for 0.75 per cent.

Assuming the members left thinking the rate rise was less than it should have been still think so on November 3rd, it requires need just two of the other six to agree to ensure another increase.

Of course, the deliberations of the MPC may reflect an initial assessment of the fact that not only has the mini-budget been dumped, but so too have its architects.

While Liz Truss is about to leave Downing Street, however, first time buyers may note that, significantly, one element of that September 23rd statement that remains is the stamp duty break. Amid a lot of uncertainty and gloom there may be some good news after all.

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