Millions of households will be hit with yet another interest rate rise after the Bank of England's latest announcement. Today (August 4), the UK's central bank revealed that interest rates will soar to 1.75 per cent in what is the biggest rise in almost three decades.
Members of the Bank’s Monetary Policy Committee (MPC) voted to increase rates from 1.25 per cent to 1.75 per cent which is now the sixth consecutive interest rate rise and the highest hike since 1995.
In the MPC's meeting back in June, a majority of 6-3 voted to increase the Bank Rate by 0.25 to 1.25 per cent, with members in the minority wanting to increase the rate by 0.5 percentage to 1.5 per cent.
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The Bank of England's announcement comes after experts warned that inflation could peak at 15 per cent, therefore the interest rate rise is set to try to bring inflation back under control.
Today's interest rise hike will be yet another blow for households struggling amid the ongoing cost of living crisis, as many people are set to see their monthly mortgage repayments affected.
James Forrester, m anaging director of estate agents Barrows and Forrester said: "The situation for homeowners is pretty desperate right now and rising inflation has already pushed many households to breaking point, as they’ve battled to manage the increased cost of living. Unfortunately things look set to get quite a bit worse before they get any better, with inflation predicted to hit 15% by spring next year.
"As a result, the cost of homeownership will become even less affordable, pushing it further out of reach for those already struggling with the financial hurdles of buying and owning a home.”
Amid their bids to become the next Prime Minister, Rishi Sunak has said Liz Truss’s “premature” tax cuts would “stoke inflation” ahead of the expected hiking of interest rates. The former chancellor said his Foreign Secretary rival in the Tory leadership race would further drive up rates, raising mortgage payments, with her swift plan of action.
His warning came before the Bank of England was forecast to raise interest rates to 1.75 per cent. Mr Sunak faced attacks from Ms Truss for overseeing rising taxes while in No 11 during the pandemic, as she pledges a more radical plan to slash them.
He insisted he does want to see taxes come down, but argues it is necessary to bring inflation under control before making major changes. The former chancellor stressed there are “crucial differences” between their plans “because timing is everything”.
“If we rush through premature tax cuts before we have gripped inflation all we are doing is giving with one hand and then taking away with the other,” he said in a statement.
“That would stoke inflation and drive up interest rates, adding to people’s mortgage payments. And it would mean every pound people get back in their pockets is nothing more than a down payment on rising prices.
“A policy prospectus devoid of hard choices might create a warm feeling in the short term, but it will be cold comfort when it lets Labour into Number 10 and consigns the Conservative Party to the wilderness of opposition.”
Ms Truss countered by saying “we cannot tax our way to growth” and insisting her plans would not drive up prices further.
“My economic plan will get our economy moving by reforming the supply side, getting EU regulation off our statute books, and cutting taxes,” she said.
“Delivering bold reforms to the supply side is the way we’ll tackle inflation in the long run and deliver sustainable growth. Modest tax cuts – including scrapping a potentially ruinous corporation tax rise that hasn’t even come into force – are not inflationary.”
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