What next for interest rates and how bad will it get for mortgages?
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Why are mortgage rates rising even though the Bank of England kept the base rate steady?
Welcome to This Is Money Podcast, sponsored by Trading212. Download the Trading212 app today and open a Cash ICE with promo code TIM to get the 12 month bonus promo rate of 4.69% term supply. I'm Georgie Frost and joining me and Simon Lambert today is Lee Boyce. And coming up, interest rates are held, but for how much longer? Mortgage rates are soaring, but how bad will it get? Good news for savers though, as fixed rates climb, we reveal the best buy. If you're happy to lock your money away, plus how to cash in on the bond market mayhem, even if you're a beginner. We talk inheritance tax allowances if your estate tops £2 million. And should you do a ROCOS and move to Greece? From property prices to tax, we reveal what you need to know.
Don't forget to stay up to date with all the latest breaking money news, just go to thisismoney.co.uk or download the app. But first, interest rates haven't Budged for nine months after the Bank of England kept them at 3.75% this week. Unfortunately, though, mortgage rates have. Five-year fixes are now at their highest level since 2023, and lenders have been hiking rates across the board. So why are mortgages getting more expensive when the Bank of England hasn't done anything? Lee, welcome. Simon, welcome. Uh the rate decision. Just keep us up. Up to speed, what happened and importantly what was said in the minutes.
Well, yesterday's rate decision came hot on the heels of the Fed rape decision the night before. And that is important to put it in context. And in the US they voted to raise interest rates. And they didn't just vote to raise interest rates, they voted to raise interest rates twelve nil. That was the vote. And also, I think probably you could go twelve one, really, because you've got the twelve members of the Fed Fed committee and then you've got one very important person, certainly in his own eyes, Mr Donald Trump, who is very much of the conviction that they should not be raising rates and they should actually be lowering rates. And there's a huge amount of pressure from Trump on the Fed being placed on the Fed.
Uh and the Fed still raised rates. So the question is why didn't the Bank of England? The Bank of England held. But the vote here was six. six to three. That was the split. The minority backing a hike did increase though, and it included the Bank of England's chief economist, Hugh Pill. So this comes even as the bank is predicting inflation to go up to four percent. And the really scary number that was bandied around this week, other than mortgages, which we're going to talk about in a minute, uh was potentially The energy price cap surging twenty-four percent in January. I mean, haven't we missed any surging energy price? Gosh. It's been so long since energy bills went through the roof. And uh Hugh Pill uh basically said an increase would send a clear signal of a commitment to hitting the inflation target amid the fog of geopolitical conflict and data noise.
But Andrew Bailey said there was very limited evidence of the energy price shock spreading through the economy causing second round inflation effects. So a rate rise is still on the table. It could come before the end of the year. It's probably quite likely to maybe come before the end of the year, but we might be going on a bit of a divergent path to the US perhaps.
Oh yeah. What people want to know mortgage rates. Why are they going up? What's happening there?
How high could mortgage rates go and what would that mean for borrowers?
Well, the way the banks uh price mortgages it is linked slightly to the base rate, but it's more linked to SWAT rates and Sonya SWAT rates and uh the way the banks borrow money essentially. And that rate has been nudging higher. And actually this week uh at the start of the week we saw uh the five big banks all make big rises to their mortgage rates. Some of them now uh are not offering sub five percent rates again, uh which is gonna be a worry. For anyone that's going to be remortgaging soon or trying to get onto the ladder. And there was then separate data this week suggesting that the average five-year fixed rate mortgage is now at a high, not seen since November 2023.
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Chapters
5 chapters
1
Why are mortgage rates rising even though the Bank of England kept the base rate steady?
0:03–3:33
2
How high could mortgage rates go and what would that mean for borrowers?
3:33–16:32
3
What impact will the jump from 0.99% to 4.88% have on people looking to remortgage?
16:32–29:25
4
Should savers lock in the new 5%‑plus fixed‑rate savings accounts?
29:25–47:15
5
Is a five‑year fixed mortgage still the best option or is investing in gilts smarter?
47:15–49:17
Speakers
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