Bank of England set to hike rates in blow for mortgages: Biggest interest increase for 30 years on cards
The Bank of England is set to implement the biggest interest rate rise for 30 years this week in a new blow to millions of borrowers.
As central banks around the world step up their fight against inflation, rates in the UK are expected to jump from 2.25 to 3 per cent. That would be the biggest increase since Black Wednesday in September 1992, when the UK had to leave the European Exchange Rate Mechanism. And it would push the cost of mortgages ever higher.
Borrowing costs have been rising for nearly a year as the Bank battles to get rising prices back under control.
Increase: The Bank of England is set to implement the biggest interest rate rise for 30 years this week in a new blow to millions of borrowers
Inflation in the UK is at a 40-year high of 10.1 per cent – more than five times its 2 per cent target.
The Bank’s Monetary Policy Committee has raised rates at each of its last seven meetings, taking them from a record low of 0.1 per cent in December to 2.25 per cent now, though never by more than half a percentage point in one go.
But a 0.75 percentage point rise is firmly on the cards on Thursday. In the wake of Kwasi Kwarteng’s mini-Budget, it was thought the Bank could raise rates by as much as 1 percentage point amid chaos on financial markets.
The junking of tax cuts and the stabilisation of the pound now make that unlikely.
Laith Khalaf, an analyst at broker AJ Bell, said: ‘Interest rates are going up, but the Government’s climbdown from the inflationary policies of Trussonomics means the Bank won’t have to slam on the brakes quite as hard.
Markets are still pricing in the base rate hitting 5 per cent in 2023, with home ownership set to become a lot more costly for mortgage borrowers.’