Rates now at highest level for 15 years
The share prices of major housebuilders dropped this morning ahead of the increase in interest rates.
The Bank of England increased the Bank Rate to 5.25%, making it the 14th consecutive rise.
The last time interest rates were over 5.25% was in April 2008.
The Bank of England鈥檚 Monetary Policy Committee (MPC) confirmed the new rate at midday.
Before the announcemnt, Persimmon shares dropped 1.49% this morning. Taylor Wimpey was down 1.58% and Barratt Developments also dipped 1.49%
Vistry Group shares were down 0.58% this morning, and Bellway was down 0.73%.
Six of the nine members of the MPC voted for today鈥檚 increase, with two voting for an increase of another half a percentage point.
Today鈥檚 0.25% increase is less dramatic than July鈥檚 rise to 5% from 4.5% and follows signs that inflation, which was at 7.9% in June, is starting to ease.
鈥淭his latest Bank Rate rise will come as disappointing news to borrowers worried about rising mortgage repayments,鈥� Rachel Springall, finance expert at Moneyfactscompare.co.uk, said.
鈥淎 rate rise of 0.25% on the current average standard variable rate of 7.85% would add approximately 拢794 onto total repayments over two years (based on a 拢200,000 25-year repayment mortgage).鈥�
The Bank of England today also downgraded its forecasts for 2024 to 2025, as the impacts of higher rates of interest affect the economy.
Peter Truscott, chief executive of Crest Nicholson, whose share price was down 1.42% this morning, said sales volumes have suffered from rising interest rates.
Speaking on the BBC, he said demand for homes remains 鈥渧ery strong鈥� but that there had been fewer reservations of new homes.
鈥淭he underlying demand remains very strong in terms of people who are interested in buying homes. But not surprisingly there has been some pause. I think a lot of people are standing on the sidelines,鈥� he added.
鈥淭he market is broadly as we expected it to be following the dislocation we experienced at the end of last year. It鈥檚 volumes rather than price that are taking the strain. Although there is some soft downward pressure on prices, it鈥檚 volumes that are going down.鈥�
In the past week, brickmakers Forterra and Ibstock, builders merchant Travis Perkins and materials supplier Marshall have all said profit is being hit by the continued slowdown in housing.
The latest recorded that house prices were falling for the fastest rate in 14 years. Following the last increase in rates, since last autumn鈥檚 mini-Budget caused market turmoil.
, however, amid inflation levels that were lower than forecast, leading some analysts to suggest mortgage rates had peaked.
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