The decision by the Bank of England to raise interest rates has been met with discontent from consumers. However, according to many industry insiders it was needed in order to tame growing inflation fears.
An increase of 0.25% means that interest rates have reached a 15-year high in the UK to 5.25%, at a time when economic strain intensifies. The Bank of England also warned that a period of high interest rates is set to be sustained for a while.
CEO of Octane Capital, Jonathan Samuels, commented: “Whilst an unpopular opinion, it could be argued that the Bank of England hasn’t been daring enough in their decision to increase rates again today and really another 0.5% increase was needed in order to tame inflation.
“It’s far better to have a short period of pain brought about by higher interest rates, rather than a sustained period of significant economic turmoil and uncertainty.
“Take America, for example, where rates started to rise at a similar time to the UK, but in a far more aggressive manner. Inflation there is already back to 3% and so the target of 2% is within reach. If we had been as bold, then we too would be close to achieving the much heralded ‘soft landing’ and would be far closer to interest rates falling than we are now.”
On the other hand, Director of Benham and Reeves, Marc von Grundherr, warned that for the nation’s borrowers, ‘a fourteenth consecutive base rate hike will come as yet another nail in the coffin’.
He also outlined his belief that the move will have an impact on the growth of a struggling property market – which he stated has been ‘treading water’ in recent months.
Von Grundherr continued: “We have seen some positive signs in recent weeks with mortgage approvals climbing. However, while this boost in market activity is good news, higher interest rates are likely to stifle the purchasing power of the nation’s buyers even more, resulting in the further stagnation of house prices.”
The Bank of England and the government emphasised that it was a decision that it was essential for the country to avoid a recession.
Managing Director of Barrows and Forrester, James Forrester also had sympathy for borrowers, as he revealed his belief that burrowers will be forgiven for ‘feeling like they are trapped in some sort of Bank of England Groundhog Day, with rates increasing for the fourteenth consecutive time today.
The base rate is now the highest seen in over fifteen years and so the latest generation of buyers will no doubt be panicked by the steep cost of borrowing they face in the current market’
In spite of this, he drew attention to the potential silverlining, which is that a lower rate of increase suggests that we could be nearing the peak and while we expect to see lucky number fifteen materialise, they could well plateau before the year is out’.
CEO of RIFT Tax Refunds, Bradley Post, described the interest hike as an ‘aggressive approach’ to managing inflation, which has thus far been ‘abysmal’.
He continued: “It’s fair to say that they haven’t acted swiftly enough, or with the required level of intent to actually curb inflation, which remains extremely high.
“At the same time, fifteen consecutive base rate hikes have had a serious impact on the average household, who are now not only dealing with a sustained increase in the cost of living, but are also paying the price when borrowing to make ends meet.”
