Bank of England set to hike mortgage rates in major blow: Biggest interest rise in 30 years on the cards
- UK base rate set to drop from 2.25% to 3% next week
- It would be the biggest increase since Black Wednesday in September 1992
- UK inflation is at 10.1%, its highest level in 40 years, more than five times its 2% target
The Bank of England is set to implement the biggest interest rate hike in 30 years this week in another blow to millions of borrowers.
As central banks around the world step up their fight against inflation, rates in the UK are set to rise from 2.25% to 3%.
It would be the biggest increase since Black Wednesday in September 1992, when the UK had to leave the European exchange rate mechanism. And that would push the cost of mortgages ever higher.
Increase: The Bank of England is set to implement the biggest interest rate hike in 30 years this week in another blow to millions of borrowers
Borrowing costs have been rising for nearly a year as the Bank struggles to rein in rising prices.
Inflation in the UK is at 10.1%, its highest level in 40 years, more than five times its target of 2%.
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% in December to 2.25% today, but never more than half a percentage point at once.
But a 0.75 percentage point rise is firmly forecast on Thursday. Following Kwasi Kwarteng’s mini-budget, it was thought the Bank could raise rates by up to 1 percentage point amid financial market chaos.
The rejection of tax cuts and the stabilization of the pound now make this unlikely.
Laith Khalaf, analyst at broker AJ Bell, said: “Interest rates are rising, but the government’s fall from the inflationary policies of Trussonomics means the Bank won’t have to put the brakes on as hard.
Markets still expect the base rate to hit 5% in 2023 as home ownership is expected to become significantly more expensive for mortgage borrowers.