Interest rates are already at their highest levels for 14 years but they are expected to rise again today, February 2. The impact of the rate rise will be felt by borrowers, due to higher mortgage and loan costs.
In December, the Bank of England increased rates from 3% to 3.5%. Rises have been consecutive since December 2021.
William Marsters, senior UK sales trader at investment platform Saxo says borrowers will be significantly affected should the Bank of England raise interest rates to the predicted 4%.
“Today the Bank of England looks set to raise interest rates for the 10th time in a row, expected to be up from 3.5% to 4% With inflation currently at 10.5% the Bank has been stuck between a rock and a hard place for a long time with little to no choice but to hike rates again with a target of reducing inflation to as low as 2%,” Mr. Marsters told the Guardian.
“This rise in interest rates has hit borrowers hard and those with large mortgages or credit card loans in particular will continue to feel the squeeze with the cost of living already tightening any kind of consumer purchasing power. Some homeowners have even decided to roll the dice and apply floating rates to their mortgages, taking the pain now in the hope that inflation will soon reduce and rates turn lower again later in the year.”
Mr. Marsters concluded: “The UK is still likely to enter a recession in the coming months, something the BoE would have had to factor into their decision, and in the long term this should see consumer prices pressured, though many businesses will be negatively affected with costs already proving difficult to manage.”
How much will interest rates rise?
The Bank of England is set to announce an interest rate rise of 0.5% going from 3.5% to 4%. This would be the 10th consecutive rise in interest and puts it at its highest level in 14 years.
When will the Bank of England announce the Interest rate rise?
The Bank of England is expected to announce a rise in interest rates at midday today, February 2. The bank make the decision following a Monetary Policy Committee meeting.
How high could interest rates go?
More interest rates are likely to come in the early part of the year, but experts believe that rises may end by the middle of 2023. Analysts believe the rate will peak at 4.5% in the summer.
The Monetary Policy Committee meets eight times a year with their next meeting planned for March 23.
The UK economy has a gloomy forecast for the year, with the International Monetary Fund (IMF) warning at the end of January that it would be the only economy in the G7 to see a reversal in its GDP growth in 2023.