The industry reacts to the Bank of England’s base rate hike

The Industry Reacts

We know what we think about base rate hikes. We also know how we’ll adapt to them. But of course, we’re not the only participants in the wider property market.

Our industry’s collective successes are the result of endless collaboration between brokers, lawyers, lenders, and countless other professionals.

If the base rate rises, we’re all uniquely affected. The same is true of skyrocketing inflation, game-changing legislation, or unexpected economic shifts.

With the base rate hitting 5%, we wanted to gauge sentiment among key players in the field. After all, while we all have our different roles to play, we’re ultimately working to support you and your clients. Despite all the dire news, we all share a passion for pushing beyond the pessimism.

We all strive to raise the industry to new heights.

“I am not a fan of solely relying on interest rates to control inflation”

Juliet Baboolal, a partner at Seddons, a leading London-based law firm, issued a reminder on how base rate hikes raise costs, and may hinder demand.

“Base rate votes can have a significant impact on real estate finance deals,” she said.

“As the central bank changes the base rate, it affects the interest rates offered by commercial banks to their customers. This, in turn, can affect the cost of borrowing for real estate investors and developers.”

Juliet warned that as obtaining finance becomes more difficult, it could result in subdued demand. This may lead to lower property prices.

“The takeaway is that real estate investors and developers need to keep an eye on base rate votes and adjust their financing strategies accordingly to take advantage of market conditions and maximize investment returns.”

The direct impact on the market was a common concern among those we spoke to. Although, there is confidence in the specialist market and how it can support property investors through this tricky period.

Indeed, our very own Zahira Fayyaz, a regional sales manager here at MFS, noted that even with a higher-than-expected hike, an increase was nonetheless widely predicted. This raises the question of why some market participants appeared to be ill-prepared.

“The recent Bank of England hike has been higher than expected but equally, it’s a measure that reflects the economic turbulence the UK is facing,” she said.

“We’re facing inflation, a tight labour force, and crop limitations in the UK. With all these variables in the wider economy, the hike is not as shocking as initially perceived. Which begs the question of how interconnected markets are and, in this market, why is the standard lending model suffering the most? Frankly it’s not delivering.

“The specialist lenders are the ones who have geared up for such circumstances. Our entire sector was developed to support clients these kinds of complex scenarios.

“Now is the time for specialist lenders to support and deliver for clients, even as the wider narrative has shifted. We’ll help weather this storm.”

Hopefully, looking ahead, we may be able to find other, less dramatic fiscal or monetary tools to utilise.

Jeff Knight, director at the Mortgage Marketing Forum, noted that as the market expected interest rates to rise, it may have cushioned the blow. The question remains though, are more hikes necessary?

“The markets expected this rate rise,” he said.

“The question is whether more hikes are likely – or indeed required. I am not a fan of solely relying on interest rates to control inflation and there needs to be different solutions.

“For example, try and find a solution to a shortage of labour supply. I would also encourage a more realistic inflation target in the short term, as all goals should be SMART.”

Akhil Mair, Managing Director of Our Mortgage Broker, shared this sentiment. He urged homeowners to carefully assess their mortgage arrangements over the coming weeks and months.

You’ll need to consider adjusting your budgets to accommodate rising borrowing costs. Not to mention the rising cost of living we all must contend with.

We may not be bereft of options though.

“In addition to raising interest rates, the UK government has a range of tools at its disposal to address and reduce inflation,” he said.

“One approach is fiscal policy, which involves managing government spending and taxation.

“By implementing prudent fiscal measures, such as reducing excessive government expenditure or adjusting tax rates, the government can help curb inflationary pressures.

“Another option is implementing targeted supply-side policies to address bottlenecks and increase productivity in key sectors, which can alleviate inflationary pressures stemming from supply constraints.”

“The specialist market is busier than ever, and is more well-equipped to cope”

Regardless of what the government could do though, lenders can only react to what’s implemented. For many high-street lenders, the reaction has been to pull products from the shelves entirely.

Sean Bowling, a director and advisor at SBL Financial, shed light on how difficult this has been for brokers and borrowers to manage.

“High-street bank’s IT systems have been failing in the last few days when trying to do DIPs and applications, you can’t get hold of BDMs due to rush and volume of cases for high-street lenders,” he said.

“However, the specialist market is busier than ever, and is more well-equipped to cope. They typically have already factored in rate rises and although it will impact eventually, it won’t be so instant.”

Sean added that, behind the scenes, some mainstream lenders have been making changes to their stress tests. This may affect BTL investors and portfolio clients specifically.

“As a specialist regulated broker, it has never been so relevant to have the maximum number possible of lenders and options for clients.

“But solutions take precedence over rates at the moment as we rush to secure deals. For some, the solutions will be bitter pills to swallow.”

It’s here where specialist lenders may be able to offer much-needed support. For high-street banks, the focus may be on affordability and income levels. But at MFS, our funding is secured against property itself.

This allows us to remain flexible, even in the face of tricky economic circumstances. We can deal with missed payments, sporadic cash flows, and broken chains.

Also, we need to remember we’re dealing with short-term disturbances that should make way for long-term prosperity. Property investment, more often than not, is a lengthy endeavour.

“This increase was not unexpected by lenders, by any stretch of the imagination”

Past performance is not indicative of future results, but it’s hard to ignore the longevity and resilience of the property market. Over several decades, property prices continued to rise. Often in the face of interest rates much higher than what we’re seeing now.

To end on a hopeful note, we turned to Chris Sykes, technical director and senior mortgage broker at Private Finance.

“This increase was not unexpected by lenders, by any stretch of the imagination,” he said.

“Lenders often benchmark their cost of funding against SONIA SWAP rates which have taken into account the Bank of England increasing rates for weeks now.”

Further hikes may be on the way, but good lenders will be ready for this. At MFS, we have over 16 years of experience behind us. We continued to lend amid a global credit crunch, political uncertainty, and an unprecedented worldwide pandemic.

We’re ready to support you and your clients through whatever challenges lay on the horizon. Evidently, we’re not the only ones with a finger on the pulse of the financial system too. Rest assured, you’re in good hands.


MFS are a bridging loan and buy-to-let mortgage provider, not financial advisors. Therefore, Investors are encouraged to seek professional advice.

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