Interest rates – live: Mortgage warning as Bank raises rates to highest level since 2008

Thomas Jackson, Managing Director for Cooper Associates Mortgages, said the interest rate rise will affect the property market, with mortgage lenders already raising their rates.

He said: “This next increase will have further consequences on homeowners and home buyers. Anticipating today’s rise, mortgage lenders have already raised their rates.

“Those on tracker mortgages and standard variable rates (SVR), are likely to see their monthly payments increase. The average SVR is now above 7%, its highest since 2008. Those on fixed mortgages are ok for the time being but anyone due for remortgage soon should put talking to a mortgage adviser to the top of their list.“

The Bank of England is expected to raise interest rates to the highest level since 2008 as inflation continues to soar.

Rates are expected to rise from 4.25 per cent to 4.5 per cent in the midday announcement, representing a 0.25 percentage point increase. The Bank’s aim in elevating interest rates is to bring UK inflation down to its 2 per cent target.

It would be the 12th time in a row that policymakers at the Bank of England have raised rates, making it even more expensive to borrow and pushing banks to lift savings rates.

It comes as UK Consumer Prices Index (CPI) inflation remained firmly in double digits in March, squeezing household budgets and proving more stubborn than expected.

In February, the Bank of England said it expects inflation to fall sharply over the rest of the year. But with CPI remaining above double-digits since then, the latest report will be watched closely for signs this forecast has changed.

Ellie Henderson, from Investec Economics, said the “clock is ticking” on the Bank’s monetary policy tightening cycle, and an increase on Thursday could be the last.

She said: “As things stand and considering the sharp downward influences on inflation in the coming months, namely from energy but also from cooling food and goods price inflation, we suspect that this could be the last hike by the Bank of England in this cycle.”

However, there is still a “high chance” the Bank will decide to lift rates by 0.25 percentage points again in June, especially if inflation remains stubbornly above target, she added.

“What is clear is that the days of successive interest rate hikes in this economic cycle are limited, but the exact endpoint is clouded with uncertainties.”

Personal finance guru Martin Lewis has urged people in the UK to take steps to shore up their savings ahead of the Bank of England’s looming interest rates announcement.

In what would represent the 12th consecutive hike, the UK’s central bank is expected to push its base interest rate up by a further 0.25 points – to a 14-year high of 4.5 per cent.

As a result, the savings rates offered by banks are also at their highest since the financial crisis.

Despite the potential returns, the MoneySavingExpert founder warns that millions of people still have money in savings and cash ISAs which are “earning far less than 1 per cent – with banks taking advantage of customer inertia”.

Given the speed at which rates have changed in recent months as the Bank of England seeks to tame the starkest levels of inflation in four decades, those who switch to savings accounts with the new and far higher rates “may be able to get quintuple the interest in minutes”, Mr Lewis said.

Andy Gregory reports:

Policymakers “will no longer predict a recession,” an economist has claimed.

Klaus Baader, the global chief economist at French bank Societe Generale said it is likely policymakers will no longer predict a recession, having previously anticipated the UK would dip into a short and shallow recession during the first quarter of the year.

It comes as the Bank of England is expected to raise interest rates to 4.5 per cent today - their highest level since 2008.

Mr Baader agreed that while a 0.25 percentage point increase in interest rates is expected from the Bank, “what is less certain is what it will do afterwards”.

The outcome will help economists determine whether interest rates will rise above 4.5% this year.

New quarterly gross domestic product (GDP) figures will be released on Friday, which is expected to show the UK economy grew over the first three months of the year.

The Bank of England has raised interest rates for the twelfth consecutive time today as it continues trying to tame sky-high inflation.

At 10.1 per cent, inflation – or rising prices – is still far off the Bank’s target of 2 per cent. However, this rate is slightly lower than what it was when interest rates were last raised in March, by 3 per cent.

What are interest rates?

An interest rate is a measure that tells you how high the cost of borrowing money is, or how high the rewards of saving are.

If you are borrowing money, typically from a bank, the interest rate on that money is the amount you will be charged for borrowing it.

It is a charge on top of the total amount of the loan and will be shown as a percentage of the overall.

Higher percentages mean paying more money to the lender for borrowing the money.

If you are saving money in a bank account, the interest rate on that money is the amount you will accrue on top of your savings. Banks will pay you a percentage of your total savings, typically at the end of the year.

How do interest rates affect inflation?

Low interest rates are used to discourage people from piling up their money in savings. High interest rates encourage saving because people get a better return for the money you are putting away.

This in turn has an effect on the price of goods.

When interest rates are low, people might spend more and this might cause retailers to put up the price of goods.

When rates are high, demand might fall as people put more money into their saving pots. This, in theory, should drive down the prices of goods and services.

However, rising prices are not a direct result of interest rate changes. Other things, including the supply of money and underlying costs, affect prices and cause inflation.

Interest rates can only help manage inflation.

Jacob Rees-Mogg has accused Prime Minister Rishi Sunak of breaking his word over the Government’s decision to ditch plans to scrap thousands of EU laws by the end of the year.

The Tory politician called the reversal of the decision a “great missed opportunity”, and claimed scrapping the laws would help tackle inflation.

Speaking to BBC Radio 4’s Today Programme, he said: “This is unfortunately a great missed opportunity.

“The Bank of England will be meeting later on and is likely to raise interest rates because we have an inflationary problem.

“One of the other ways to help tackle inflationary problems is supply side reforms – that is, getting regulations that hold the economy back removed.

“Over decades, we introduced rules from the European Union that made us less economically competitive.

“Setting a deadline theoretically makes Whitehall work – without a deadline, nothing will happen, and we will retain these laws for a long time.”

Changes in the Bank of England’s base rate, which is the interest rate at which high street banks borrow from Threadneedle Street, has a knock-on effect on the interest rates that the former then set their mortgage borrowers.

The changes will also affect anyone with savings and anyone who is borrowing money from banks.

It will also have a wider effect on the economy. By raising the base interest rate, the BoE is hoping to temper soaring inflation and help with the cost of living crisis.

Prime minister Rishi Sunak is at risk of failing in his pledge to halve inflation this year, according to an economic think tank.

The National Institute of Economic and Social Research (Niesr) forecast that inflation will remain persistently higher than expected over the rest of 2023, in a worrying prediction for under-pressure households.

In its latest set of projections, the forecaster said inflation is expected to drop from its current level to 5.4% by the end of 2023.

The Prime Minister pledged to cut UK inflation in half in January when the figure was 10.1%.

The latest figures from the Office for National Statistics (ONS) showed inflation still at 10.1% in March after a surprise acceleration in February.

The figure has rocketed over the past year on the back of spiking energy prices after the Russian invasion of Ukraine and more recent jumps in food costs.

Niesr said inflation will continue to cool but households will see a 0.7% drop in real disposable income over the year.

The predictions are significantly higher than those of the Government’s official forecaster, the Office for Budget Responsibility (OBR), which estimated in March that inflation would drop to 2.9% by the end of the year.

Official inflation readings have come in higher than expected since the forecasts were made.

Niesr’s fresh estimates come amid continued pressure on the Bank of England to deal with inflation.

The central bank is expected to hike rates by 0.25 percentage points to 4.5% later on Thursday.

The think tank predicted that the Bank was likely to further increase rates to a peak of 4.75% in the coming months, heaping more pressure on households.

Stephen Millard, deputy director for macroeconomic modelling and forecasting at Niesr, said: “Despite recent positive news, we still expect sluggish GDP growth over 2023 and a fall in aggregate real personal disposable income, driven by the persistently high rate of inflation.

“This fall in real incomes creates a need for the Government to intervene to support those households less able to cope.”

Britain’s interest rates are expected to rise to the highest level since 2008.

According to economists and the financial markets, the base rate will rise for the 12th consecutive time as inflation continues to soar.

Policymakers at the Bank of England are expected to raise interest from 4.25% to 4.5% on Thursday, representing a 0.25 percentage point increase.

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