Alliance and Leicester comments on today's MPC decision to increase base rate to 5.5%

Stephen Leonard, Director of Mortgages at Alliance and Leicester: "A rise was expected this month to curb the effect of high inflation rates previously reported by the Bank of England.

The mortgage market has already factored in a potential rate rise in anticipation of today's announcement, and is still reporting strong growth, so any knock-on effect should be minimal.

"House price inflation is significantly down on last year, and the market is currently experiencing a cooling effect, as increased inflation, higher borrowing costs and the possible introduction of HIPs are all leading to consumers tightening their belts, taking stock of their finances and perhaps delaying their decision to buy or sell a property.

"However, indications are that the rate may well be at the top end of the curve so borrowers needn't panic.

As the effect of lower energy prices comes into play and inflationary pressures are likely to slow towards the second half of the year, this could lead to rates falling back again.

"First-time buyers should consider locking into a fixed-rate mortgage enabling them to have the security of regular payments, and allowing them to budget at a level they find comfortable and affordable.

There are still deals on the market under 5.5%, and borrowers should act quickly if they want one.

"Competition in the buy-to-let market is intense - consequently there are some good value rates available.

With the rate rise, landlords will have to consider either charging the tenant more, or increasing the level of deposit they put down on a property in order to make the economics work for them.".

Back to top