Bank of England set to hike rates in blow for mortgages
Bank of England to raise interest rates on mortgages: biggest rate hike in 30 years on cards
The Bank of England is set to make its biggest rate hike in 30 years this week as another blow to millions of borrowers.
As central banks around the world step up their fight against inflation, interest rates in the UK are expected to rise from 2.25 to 3 percent. 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 drive the cost of mortgages ever higher.
Borrowing costs have been rising for nearly a year as the Bank struggles to regain control of rising prices.
Increase: The Bank of England will make its biggest rate hike in 30 years this week, as another blow to millions of borrowers
Inflation in the UK is at a 40-year high of 10.1 percent – more than five times the target of 2 percent.
The Bank’s Monetary Policy Committee has raised interest rates at each of its last seven meetings, from an all-time low of 0.1 percent in December to 2.25 percent now, but never by more than half a percentage point at one time.
But an increase of 0.75 percentage point is firmly on the agenda for Thursday. In the wake of Kwasi Kwarteng’s mini-Budget, it was thought the Bank could raise interest rates by as much as 1 percentage point amid chaos in the financial markets.
Throwing out tax cuts and the stabilization of the pound now make that unlikely.
Laith Khalaf, analyst at brokerage firm AJ Bell, said: “Interest rates are rising, but the government’s backlash from Trussonomics’ inflationary policy means the bank won’t have to hit the brakes so hard.
Markets are still pricing the base rate down to 5 percent by 2023, with home ownership becoming much more expensive for mortgage borrowers.’