The Bank of England has held the base rate at 0.5 per cent, but its committee minutes suggest rates will rise more quickly and more sharply than previously expected.
Monetary Policy Committee members voted unanimously in favour of leaving interest rates unchanged for now.
Their report released today says: “Were the economy to evolve broadly in line with the February inflation report projections, monetary policy would need to be tightened somewhat earlier and by a somewhat greater extent over the forecast period than anticipated at the time of the November report.”
Trussle founder Ishaan Malhi says: “We may not see another interest rate rise for a few months, but it’s looking like it won’t be long before mortgage rates begin to climb.
“Low interest rates and government subsidies have encouraged banks to lend, but the days of cheap credit could be numbered.”
Malhi adds: “The Term Funding Scheme, which has propped up lending to the tune of £100bn in the last 18 months, comes to an end this February and may well have a knock-on effect on mortgage rates.”
On Monday, industry mortgage experts predicted that a base rate rise could occur as soon as May.
Echoing these predictions, Hargreaves Lansdown senior economist Ben Brettell says: “Prior to today’s announcement, markets were factoring in a 50 per cent chance of a rate rise in May, and an 80 per cent chance they’ll be higher by the end of the year.
“Sterling jumped on the news, rising more than a cent against the dollar to break through the $1.40 barrier.
“Gilt yields rose in anticipation of higher interest rates, while the FTSE 100 extended the day’s modest losses.
“Today’s news comes amid investor concerns that faster growth and higher inflation could prompt central banks across the globe to tighten monetary policy more aggressively. These worries have led to a sharp sell-off in stock markets this week.”
