After the Bank of England hiked interest rates yest again, families across the country are facing another hit to their finances.
Bank officials say the increase to 4.5% is the latest measure in a bid to keep a lid on soaring inflation.
But as households are left worrying over their monthly budget and homeowners have been hit by another mortgage rise, Andrew Bailey attempts to provide some answers...
Q: I’m a borrower impacted by this latest rate hike. I was already struggling to make ends meet and this will just make things even worse. What do you say to people like me?
A: I know that raising rates isn’t easy for people when money is already tight. But it’s the best way we have to make sure that prices don’t keep rising at the rates they have been – which would be much worse.
Q: Just when will this current wave of rate hikes end? Do you think the Bank could even begin to start cutting rates later this year or next?
A: It’s just too soon to say. It’s our job to get inflation back down to the 2% target and for it to stay there. We’ll make whatever decisions are needed to ensure that happens.
Q: Do you accept that hiking the base rate from 0.1% in late 2021 to where it is now has added to the cost of living crisis?
A: The biggest cause of the cost of living crisis has been the increase in energy and food prices due to the war in Ukraine. We know how difficult this has been for people, which is why our focus is bringing inflation back down to 2% - and raising interest rates is the best way to do that.
Q: Have you got a mortgage Governor? If so, have your repayments risen as a result of the rate hikes?
A: I’ve lived in my home for 27 years, so I’m old enough and fortunate enough to no longer have a mortgage. I’m very aware of the impact of interest rate rises on mortgage holders across the country. But I also know that high inflation hits everyone, and hits people on the lowest incomes hardest and that’s why we have taken the action we have.
Q: Does the Bank think inflation has peaked?
A: Yes we do and we expect to see it fall sharply starting later this month. This is good news. But we do need to be sure it falls all the way back to 2% and that’s why we’ve decided to raise interest rates.
Q: Rocketing food inflation is one of the biggest concerns for many households right now. Does the Bank/MPC think it will keep rising?
A: Higher food price inflation is a worry for us all. As part of my job I meet food producers and retailers around the country. They expect food inflation to come down over this year. We want to see that happen.
Q: Do you share the concerns of MPs that high street banks are failing to pass on rising interest rates to savers while at the same time increasing mortgage rates sharply?
A: Some savings rates have gone up, and some more than others. There are lots of options out there, I would encourage people to shop around for the best rates.
Q: Does the collapse of several US banks suggest the global banking system is, once again, showing signs of strain? Is this the biggest challenge for the financial system since the 2008 banking crisis or is it a storm in a teacup?
A: We have seen strains in some banking systems abroad recently, but I can assure you that our UK banks are safe and sound. We are very focused on ensuring things stay that way.
Advice from an expert
IF you are struggling with your mortgage payments, don’t suffer in silence, get advice or speak to your lender.
David Hollingworth from broker L&C Mortgages added: “You can also look at what rate you’re on.
“The typical standard variable rate is now almost 8% and you could do much better on a fixed or tracker deal.”
You could looked to extend your mortgage. That would reduce your repayment but cost you more in interest over time.
Renters could also be hit if landlords pass on higher mortgage costs.
Citizens Advice says landlords can’t just increase your rent whenever they like, or by any amount.
They must follow certain rules, depending on what type of tenancy you have.
If you and your landlord can’t agree on your rent increase you can ask a tribunal to decide for you - it’s free to apply.
