The Bank of England (BoE) has announced the biggest interest rate rise in 27 years – and it could mean renters see record rents rise even further.
Interest rates now sit at 1.75 per cent – the highest point since December 2008 when the UK was battling the global financial crisis. BoE governor Andrew Bailey greenlit a 0.5 per cent rise on Thursday – the largest single increase since 1995.
The BoE has been raising interest rates in recent months to tackle surging inflation, which is now at nine per cent and is predicted to rise to 13 per cent by the end of 2022, driven by rising energy bills. The UK is also forecast to go into recession in the last three months of 2022.
Raising interest rates encourages people to save rather than spend and increases the costs of mortgages for homeowners who are forced to pay higher interest rates. There are fears that these higher costs could be passed on to renters.
“This interest rate rise will do nothing for renters who are bearing the brunt of the cost of living crisis, facing soaring utility bills with no control over the energy efficiency of their homes,” said Dan Wilson Craw, deputy director at Generation Rent.
“Rising rents in the market mean that it is easy for landlords to raise the rent on existing tenants. Mortgage costs have little to do with it – after all, landlords didn’t cut rents en masse when interest rates fell in the 2010s.