For the first time since July 2007, the Bank of England (BoE) has raised interest rates from 0.25% to 0.5% to help curb high inflation
On 1 November, the Monetary Policy Committee (MPC) voted by a majority of 7-2 to increase interest rates to 0.5%.
The move reverses the cut in August 2017, immediately after the Brexit vote, where the BoE changed interest rates for the first time since the crash in 2007, dropping rates to a record low of 0.25%.
Around four million houselholds will face higher mortgage payments however savers will see a small lift in their returns.
Paul Davies, director at Menzies, said: ‘Even though today’s rate rise was well signposted by Mark Carney, it will bring hardship for businesses that rely on consumer spending.
‘Consumers are always wary of a rise in interest rates and we may see the retail industry experiencing a bumpy ride as UK shoppers tighten their purse strings. Businesses can defend against the effects of turbulence by ensuring cash management is a top priority, managing creditor payments and adapting to changes across the supply chain.
‘Consumers and businesses will be hoping that after today’s announcement, any further interest rate rises will be staved off until well into the New Year.’
Nimesh Shah, Partner at Blick Rothenberg, said: ‘The largest affected group will be homeowners with standard variable rate or tracker mortgages, who will see their monthly mortgage payments increase.
‘The rate rise is bad news for first time buyers and people moving home as they will see the cost of borrowing increase. There is more pressure now on the Government to reform stamp duty land tax (SDLT) at the Budget on 22 November to help first time buyers, and there could be a form of SDLT holiday announced.
‘Landlords are not going to be pleased by the rate rise and they have been particularly squeezed in recent times, with the increase in SDLT and the mortgage interest relief restriction now taking effect. It is a double blow for landlords who will see an increase in mortgage costs without being able to achieve tax relief on the increased cost.
‘Landlords may look to pass on the increase cost through higher rents, which is again concerning for those looking to save to buy a home. Alternatively, landlords facing higher costs may look to sell all or part of their property portfolios.’