The Bank of England has raised the base rate 250 basis points to 5%, it was announced at noon
The Monetary Policy Committee hopes the rise, which was widely expected by analysts, will help cool inflation, which is running at 2.4% - 400 basis points higher than the government’s 2% target.
The rise is unlikely to affect the acquisition plans of most property investors, many of whom had already factored in base rate rises to 5.25% in their deal financing this year.
But the news will come as a blow to owner-occupiers and people looking to gain their first step on the housing ladder. The extra 0.25% on a tracker mortgage will increase repayments by £15 a month on a 25-year £100,000 tracker mortgage.
Philip Davies, chief executive of Linden Homes, believes the rate rise will not cause any significant damage to the vitality of the housing market, but he is fearful that a second rise early in the new year, could tip the balance.
'Today's interest rate rise was widely expected and the majority of homeowners had already priced it in, so I do not expect it to have a significant impact.
'But a further rise in December or January would have a detrimental effect on consumer confidence, so I await the minutes of today’s MPC meeting with anticipation to see how the committee members voted.’ he said.