The Bank of England raised interest rates in September 2022. This increase marks the seventh rise since December 2021, when the base rate was just 0.1%. This puts the Bank rate at its highest level in 14 years.
It’s true, interest rates were already on the rise in a bid to bring inflation under control which is an issue facing the whole developed world due to supply chain issues, and now the war in Ukraine.
However, in September the new Chancellor Kwasi Kwarteng announced a ‘mini-budget’ with eye-watering levels of borrowing that spooked markets, caused the pound to tumble and triggered a response from the Bank of England that signalled more aggressive monetary policy would follow in the form of bigger rate rises.
In the days that followed, lenders began removing their products from the market with no notice, affecting ongoing applications and reducing the choice available to borrowers. Lenders were forced to increase bridging loan rates before returning to market because the volatile rate markets make it difficult to predict the rate at which lenders will borrow their money.
There are all sorts of complicated factors at play that dictate the costs of borrowing money, and we’ve done our best to explain it in this article here. If you fancy learning about SONIA and swap rates, you’ll find it an interesting read.
