BoE is committed to its path of using interest rates to curb inflation - Comment for BoE interest rate decision from Richard Pike at Phoebus Software

04 August 2022

Richard Pike, Phoebus Software sales and marketing director, says “There are two schools of thought when it comes to raising interest rates to curb inflation. One is that high inflation is bad and something needs to be done about it. The other says inflation is better than recession and if we keep going the way we are going then recession is very likely. With the country, in fact the world, recovering from the pandemic recession is not a prospect that any of us wants to consider. However, this latest interest rate rise shows that the Bank of England is committed to its path of bringing down inflation and using interest rates to do that.

“For the housing market this of course means that mortgage rates will continue to rise in line with the Bank of England, which as some point will mean that people are less and less likely to want to take on more debt. Although rates are still relatively low when you consider how cheap money has been to borrow over recent years this landscape of increasing rates is a new phenomenon to many homeowners. Lenders are going to find that, even if the homebuyer market dips, the demand from borrowers to tie themselves into longer term fixes is going to increase exponentially.

“Looking forward we have to consider whether we are getting to a point when we will see corrections in house sale asking prices, and if so how quickly and how far will prices fall?”