Yesterday’s decision by the Bank of England to raise its base rate to 1.75% has led many economists to predict a recession in the offing as the bank attempts to control rampant inflation.

While this will make some landlords’ variable rate buy-to-let mortgages more expensive, and impoverish some tenants who are heavily in debt, it should be noted that lenders do not always pass these rate rises on either immediately or directly.

Millions of landlords are protected from rate rises by their fixed rate mortgages, and recent rises in rents mean many have seen increased income from their properties.

But what might this rate rise mean for the wider property market. We canvassed some expert opinion from within the property industry.

Trevor Abrahmsohn of Glentree International

“Thank the Lord that the BoE has at last ‘woken up and smelt the coffee’ by raising the interest rate to 1.75%. 

“With inflation predicted to peak at 13.3% in October, even at this low rate by comparison, will not, I fear, have much effect on the inflation rate.  They are going to have to crank it to 4 or 5% in order to make a dent.

“But I have to say that despite the looming storm clouds of recession and stratospheric energy costs, the property market is still reasonably buoyant, and carries a shortage of supply which will underpin prices. 

“This latter data is the bellwether of the market and as soon as supply exceeds demand, prices will inevitably fall.

“I think the top of the market will be seen as the summer of 2022 and at best, values will level pay and at worst, will fall.”

Jason Tebb, Chief Executive Officer of OnTheMarket.com

jason tebb

“This latest rate rise was widely expected, given continued high inflation, but we don’t expect it to quash positive buyer and seller sentiment in the housing market. 

“As stock levels continue to tick up, we are gradually moving towards a more rebalanced market in terms of supply and demand. Yet this will take time and until then, the ‘new normal’, an elevated version of the pre-pandemic market, continues.”

Nicky Stevenson, MD of Fine & Country

nicky fine and country

“Previous interest rate rises have failed to dampen growth in Britain’s red-hot housing market — but today’s hike is the biggest in more than a quarter of a century and will of course be painful for many.

“For those on standard variable rates, the arguments in favour of switching to a fixed deal have never been more compelling. Fixing rates now will allow you to insulate yourself against further rises for years to come.”

Marcus Dixon, Director of UK Residential Research at JLL

marcus dixon

“The Bank of England continues to walk a challenging tightrope, one which some say it stepped onto too late.

“Global economies continue to struggle with rising inflation, a combination of demand returning following the lifting of covid restrictions alongside the implications on food and fuel costs following the war in Ukraine.

“The Bank of England alongside many global banks is responding by increasing rates in an attempt to counter inflation.”

Anthony Codling, Twindig

anthony codling

“As widely anticipated, the MPC decided to raise Bank Rate by 50 basis points from 1.25% to 1.75% today as the Bank of England gets tough on inflation and the causes of inflation, seeking to control inflation through the use of monetary policy.


“We expect that this latest 50 basis point rise in Bank Rate will feed through to mortgage rates in September.

“These rises are likely to increase floating mortgage rates and standard variable rates by half of one per cent (50 basis points).

“If your floating rate is 2.50% today it is likely to be 3.0%in September leading to an additional monthly mortgage payment of £25 per month for every £100,000 borrowed.”

Walid Koudmani, chief market analyst at XTB

walid xtb

“We saw investors sell out of their pound sterling positions in reaction to the UK’s biggest interest rate hike in 27 years.

“The hike itself was widely expected but the moods of GBP investors dampened from the negative rhetoric from the Bank of England itself on the UK’s economic outlook.

“The UK central bank expects the UK economy to shrink in the final quarter of this year and suffer from a recession for all of 2023. This marks a stark turn in their projections.”

7 COMMENTS

  1. Hopefully the Bank Base Rate will get up to 5% or even 8%.

    Those who have borrowed too heavily will have secured 5 year (even 10 year) fixes to safeguard against this happening as we’ve known for a while it’s coming.

    Some homeowners will default, lose their homes and will fall back on the massive over-supply of private and social housing – oops.

    The shortage of PRS properties will get even worse, landlords will be passing on mortgage cost increases and rents will go up.

    Long suffering savers might start to see a return on their money too.

    Many people will complain they have to reduce their monthly streaming budget from 3 services to 2, perhaps eat out only once a week and reduce their Deliveroo budget; maybe even cut back on quarterly holidays.

    These periods of “financial self-revaluation” are a good thing.

  2. Seems to me interest rates have been artificially low for a decade and its now time to get back to “Business as usual” with regards to Base rates which even now are still extremely low by historical comparison.

    Inflation is the result of govt pumping billions into the economy via furlough and QE, again a re-balancing is inevitable.

    The older members of society have seen it all before and will be in a far better position through experience on how to deal with this.

    The “Tiktok” generation of entitled Snowflake graduates will have a rude awakening I suspect. Whilst those who were smart enough to get a trade will be largely unaffected as there is such a demand for their services.

    Perhaps as homelessness starts to rise the govt may have an “Epiphany” moment in respect of landlord bashing and may decide to quietly shut up and leave the PRS to basic economic fluctuations.

    But regardless of that I suspect most landlords are being adequately compensated by increasingly high rents due to the shortage of properties available for rent.

  3. “This marks a stark turn in their projections.” When has the B of E ever got a prediction right anyway? They predict & then always change their mind before the event. That means they were wrong. How is that predicting? We can all do that.

    Seen it all before. Inflation will rise & eventually fall as will interest rates.

    No one know when / what they will get to. Either or both could go to anything from 4% up to 20%. Or more.

    Those that pretend they know or that they can predict are charlatans claiming to be some kind of soothsayer.

  4. The BoE should have reduced to 0%.

    Japan has had 0% for about 30 years.

    Japan economy seems to be doing just fine.

    Nobody in the UK gives a stuff if bread increases in orice

    It is rent and mortgages that are most important along with utility costs.

    Keeping IR low encourages spending which is what is required.

    With the dopey BoE increasing IR there will be a recession.

    There will be many repossessions especially of S24 LL
    The true horror of S24 will show itself soon.

    Dopey LL will finally appreciate they don’t have a viable business because of S24.

    LL need to sell up ASAP!!

    Govt will further achieve its objective with a recession and high IR of eradication of many more LL.

    Of course there will be mass tenant homelessness but Govt doesn’t care about that.

    Though I suspect many homeless tenants will return to familial homes and become unemployed.

    With a substantially reduced PRS Labour mobility will very severely constrained which will NOT assist economic growth at all.

    But the UK will still be importing migrants to do jobs that the lazy feckless British unemployed could and should be doing.

    The DWP won’t force the lazy b######s to work so they will receive full UC welfare whilst migrants pick up the slack.

    High IR are a threat to the housing market which is the nadir part of the economy
    Tamper with that at your peril

    I remember high IR back in the 80’s.

    I was NEVER concerned about inflation but I was about high mortgage IR.

    That was the only thing that could have made me homeless

    Everything else could be managed by cutting back on everything but not mortgage interest.

    Interest rates should be reduced to 0% for decades

  5. Sanctions on Russia where dumb. I thought it was meant to end the war in a month. On the contrary, we are paying through the nose for energy. May be we should force Russia to accept price controls on their energy. That would bring down inflation immeditly.

    Why would the Russian stop, if the price of energy has gone up?. Even if they told a tenth, they make more then they did before.

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