Interest rates latest: Bank of England confirms rise to 1.75% as inflation to hit 13%

<p>A bigger hike in interest rates is on the cards for August, according to experts </p>

A bigger hike in interest rates is on the cards for August, according to experts

(PA Wire)

The Bank of England has hiked the interest rate to 1.75 per cent in the biggest increase for 27 years.

The cost-of-living crisis will continue throughout next year and only begin to ease in 2024, with the UK economy contracting for five consecutive quarters, according to the Bank’s latest forecasts

Inflation is set to surge to 13.3 per cent this winter when soaring gas prices mean that consumers face average energy bills of £3,500 – up from £1,200 a year ago – the Bank said.

Households face the longest and sharpest fall in living standards on record as energy bills triple and the UK plunges into a deep and protracted recession, the Bank of England has warned, in one of its bleakest ever assessments of the economy.

The Resolution Foundation think tank has warned that next year inflation could reach an “astronomical” record-high of 15 per cent – the highest level since 1980.

1659612497

Interest rate hike ‘no match’ against current inflation, experts warn

Experts have warned that the Bank of England’s latest interest rates hikes will be “no match against the current inflation.”

Colin Dyer, Financial Planning Expert at abrdn said: “While a higher-than-normal rate increase to 1.75% will be welcomed by savers, it’s still no match against the current 9.4% inflation.

“There is an undeniable financial pressure on cash-strapped households that will continue to mount in the months to come, with soaring energy, food and fuel prices showing no signs of slowing. A 0.5 per cent rate rise won’t be enough to balance this out.

“This is why savers need to take matters into their own hands. Considering strategic ways to grow the money they have is crucial, whether that’s by speaking to an expert about options available or reviewing if it is time to accept some investment risk. This will be particularly key for retirees relying on cash savings who will be seeing their savings loose real term value against rising inflation.”

Richard Ollive, specialist financial adviser at Wesleyan added that the increase will have a profound impact on homeowners.

“Figures show that just over a fifth of all mortgage holders in the UK are on variable rate deals, meaning around 1.9 million homeowners will be hit with a rate rise, and potentially end up paying hundreds of pounds more in annual repayments,” Mr Ollive said.

“As a result, many of those will now be looking at their deals – possibly for the first time in a long time – and considering whether they would be better off remortgaging for a fixed deal instead. While nobody can predict what will happen next with any certainty, speaking to a professional adviser is always good advice before making any long-term financial decisions.”

(PA Archive)

1659611852

Government must get grip on inflation, Rishi Sunak warns

Tory leadership hopeful and former chancellor Rishi Sunak said: “One of the most urgent challenges we face as a country is getting inflation under control as quickly as possible.

“The Bank has acted today and it is imperative that any future government grips inflation, not exacerbates it.

“Increasing borrowing will put upward pressure on interest rates, which will mean increased payments on people’s mortgages. It will also make high inflation and high prices last for longer, making everyone poorer.

“As prime minister I would prioritise gripping inflation, growing the economy and then cutting taxes.”

1659611651

Economic situation could ‘worsen’ if energy prices increase

The cost-of-living crisis will continue throughout next year and only begin to ease in 2024, with the UK economy contracting for five consecutive quarters, according to the Bank’s latest forecasts

Inflation is set to surge to 13.3 per cent this winter when soaring gas prices mean that consumers face average energy bills of £3,500 – up from £1,200 a year ago – the Bank said.

The inflation forecast was up sharply from the 9.4 per cent predicted just two months ago, with prices now on track to continue rising rapidly throughout 2023.

The Bank’s Monetary Policy Committee (MPC) warned that there was “exceptionally large” risk around its latest projections, and the situation could deteriorate further if gas prices move higher still.

1659611248

BREAKING: Bank of England confirms interest rate hike to 1.75 per cent

Households face the longest and sharpest fall in living standards on record as energy bills triple and the UK plunges into a deep and protracted recession, the Bank of England has warned, in one of its bleakest ever assessments of the economy.

The cost-of-living crisis will continue throughout next year and only begin to ease in 2024, with the UK economy contracting for fice consecutive quarters, according to the Bank’s latest forecasts

Inflation is set to surge to 13.3 per cent this winter when soaring gas prices mean that consumers face average energy bills of £3,500 – up from £1,200 a year ago – the Bank said.

Read the full story below:

1659609992

The International Monetary Fund last week cut its outlook for global economic growth, citing higher-than-expected inflation, continuing Covid-19 outbreaks in China and further effects from the war in Ukraine. The UK economy is likely to expand just 0.5 per cent next year, the slowest growth rate among the world’s advanced economies, the IMF said.

The landscape is especially complicated for central banks because many of the factors driving inflation are beyond their control, particularly food and energy prices that have soared due to uncertainty surrounding Russia’s invasion.

But those external pressures are now becoming embedded in the UK economy, with public- and private-sector workers demanding wage increases to prevent inflation from eroding their living standards.

“This explains why at the MPC’s last meeting we adopted language which made clear that if we see signs of greater persistence of inflation, and price and wage setting would be such signs, we will have to act forcefully,” Mr Bailey said in speech last month. “In simple terms, this means that a 50 basis point increase will be among the choices on the table when we next meet.”

1659608527

Raising interest rates ‘won’t solve cost of living crisis,’ expert warns

Raising interest rates will not solve the cost of living crisis, an economics commentator has warned.

Grace Blakeley told Good Morning Britain: “This inflation is not being driven primarily by demand it’s been driven cost pressures, supply chain pressures, by rising energy prices – it’s a similar sort of situation to what we saw in the 1970s when you had the two oil price hikes.

“That drives inflation across the whole economy because fuel petrochemicals go into everything, not just the transportation of good, not just the production of energy but they go into so many goods as well.

“Therefore raising interest rates is not going to help anything it’s going to make the situation worse.”

1659606246

When is the Bank of England’s announcement today?

The Bank of England (BoE) is expected to announce its biggest interest rate rise in almost 30 years on Thursday as the UK continues to grapple with soaring inflation.

The central bank’s Monetary Policy Committee (MPC) has already raised interest rates five times this year, overseeing an increase from 0.1 per cent in December 2021 to 1.25 per cent in June as it attempts to put the brakes on runaway inflation – currently at a 40-year high of 9.4 per cent.

It is now expected to hike them even further to 1.75 per cent, with a Reuters poll published earlier this week reporting that 70 per cent of the 65 economists surveyed expected that to happen today

The Bank of England will announce its decision in a press conference from 12pm on Thursday 4 August, with its governor Andrew Bailey speaking from 12.30pm.

Read the full story below:

1659605087

Will rising interest rates cause a property market crash?

Mortgage payments are on the rise after successive interest rate hikes from the Bank of England and further increases expected over the coming months.

The Bank is seeking to contain inflation which is on course to hit 15 per cent by early 2023 – the highest in four decades.

Ultra-low interest rates have made mortgage borrowing cheaper, inflating a housing bubble that has made homeownership a distant dream for many renters in some parts of the U

Figures show that prices rose 12.4 per cent over the year to April. That was a big jump on the 9.7 per cent increase recorded in March, and it means the average sold price rose by a staggering £31,000 – more than the median UK wage – to £281,00.

For now, it seems, buyers are willing to stomach the relatively modest rise in monthly mortgage payments, although the official data does not yet reflect the most recent increases to interest rates.

All four nations saw big gains in the cost of a home with average prices increasing in England to £299,000 (11.9 per cent), in Wales to £212,000 (16.2 per cent), in Scotland to £188,000 (16.2 per cent) and in Northern Ireland to £165,000 (10.4 per cent ).

1659603541

Liz Truss threatens to interfere with Bank of England mandate after policy disagreement

Liz Truss is to review the Bank of England’s mandate after supporters of her leadership campaign said it had been “too slow” to raise interest rates.

The Tory leadership frontrunner believes the bank, which has been independent of government since the 1990s, should have raised interest rates “a long time ago”.

But policy is currently set by an independent committee of economists, meaning the government currently has no direct say in whether they go up or down.

But speaking ahead of the announcement an ally of Ms Truss insisted on Thursday morning that the central bank would remain independent despite the would-be prime minister’s planned meddling.

Read the full story below:

1659602083

More than half a million homeowners in south east face ‘mortgage ticking time bomb’

More than half a million homeowners in London and the south east face a “mortgage ticking time bomb”, new analysis revealed.

With the City widely expecting a historic half a percentage point rise in interest rates by the Bank of England’s Monetary Policy Committee (MPC) on Thursday, 565,000 people in the capital and surrounding region face paying hundreds of pounds more each month as cheaper fixed-rate deals expire.

Successive increases to the Bank of England’s base rate since February mean that the typical mortgage holder on a tracker rate is already paying an additional £104 a month — or £1,248 a year —and they will see an immediate increase in payments from a further rise.

The repayment figures compiled by the Liberal Democrats were based on data from the trade body UK Finance and were calculated using a typical fixed average mortgage balance of more than £160,000 outstanding.

(PA Archive)

Leave a Reply

Your email address will not be published. Required fields are marked *