Bank of England governor Andrew Bailey is to be grilled by MPs over whether hikes in interest rates threaten Britain’s financial stability.
He and other members of the bank’s Financial Policy Committee will face questions at a hearing by the powerful Commons Treasury Committee next Wednesday.
Interest rates were hiked from 0.1 per cent to 5.25 per cent between December 2021 and August 2023 as the bank responded to inflation soaring into double figures.
It fell to 3.9 per cent in November.
But the committee, chaired by Conservative MP Harriett Baldwin, stressed that the decision to increase and then hold interest rates at 5.25 per cent had seen UK households and businesses face “rapidly increasing running costs while borrowing also became a more costly option", as mortgage rates rose, as well as rents.
MPs were expected to question Mr Bailey and the other FPC members over whether these “pressures could have implications for the UK’s economic resilience”.
They may seek answers over the impact increasing levels of debt may have on the UK’s financial stability, as well as over whether artificial intelligence is considered a risk by the FPC.
The other FPC members due to appear before the committee are Sarah Breeden, Deputy Governor for Financial Stability at the bank, and external members Jonathan Hall and Carolyn A. Wilkins.
Mortgage rates shot up as the bank’s Monetary Policy Committee hiked interest rates to rein in soaring inflation, driven upwards by the cost of gas and oil following Vladimir Putin’s invasion of Ukraine.
But lenders have more recently cut home loan rates.
First Direct has announced rate cuts across its fixed-rate repayment mortgage range, with deals below four per cent set to be available from Friday.
The announcement was made following rate cuts from other lenders this week, including HSBC UK and Halifax.
As part of the revamp, First Direct is launching two products at 3.99 per cent from Friday.
They include a 10-year fixed mortgage for people with a 40 per cent deposit, with a rate of 3.99 per cent, reduced by 0.98 percentage points from 4.97 per cent previously.
Also for people with a 40 per cent deposit, First Direct will offer a five-year fixed mortgage priced at 3.99 per cent - a rate which is being reduced by 0.65 percentage points.
The rates will be available to new and existing customers.
More than 240 separate rates across HSBC UK’s residential and buy-to-let range have been reduced.
TSB also announced cuts to some of its two-year-term mortgage rates from Friday, including reductions of up to 0.55 percentage points for first-time buyer deals and home-mover products.
Halifax has launched new remortgage rates, including a five-year fixed-rate product at 5.27 per cent for homeowners with a 10 per cent deposit, which has a £999 fee. The previous rate for this deal was 5.68 per cent.
Danny Belton, head of lending at the Mortgage Advice Bureau, said: “The drop we’ve seen in mortgage rates is due to swap rates falling and lenders passing on the reductions to customers. This could be a sign of things to come, and we could see more lenders reduce rates in the coming days and weeks.”
In signs that recent mortgage rate cuts could be encouraging potential home movers who have been sitting on the sidelines, property website Rightmove reported this week that a record number of sellers put homes up for sale on its website on Boxing Day.
Just over 10,000 new properties came to market on Boxing Day 2023, a record for any Boxing Day and the biggest number of new sellers in any single day of the year dating back to 2011, Rightmove said.
The number of buyers contacting estate agents about homes for sale also jumped - and was 17 per cent higher than on Boxing Day in 2022.
