Martin Lewis has said there is "very, very little hope" of interest rates falling in the near future - and that they could rise even further. The Money Saving Expert was speaking on Good Morning Britain where he appeared as a guest on Wednesday September 21 to take questions from viewers on the cost of living crisis.
During the segment Mr Lewis was read a question by host Susanna Reid from one viewer who said her interest-only mortgage has increased £200 a month and wanted to know whether interest rates might drop in the near future. In August the Bank of England raised interest rates to 1.75% from 1.25% – the highest level since January 2009 - in a bid to reduce demand with inflation set to hit 13.3% in October.
But Mr Lewis poured scorn on any suggestion that the UK could see interest rates fall soon, saying there was "very, very little hope" of that happening.
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"We are expecting an interest rise tomorrow - the current UK base rate is 1.75%," he said. "It's likely to be going up to 2.25% or 2.5% tomorrow, so that's a 0.5% or a 0.75% increase, which will add around £40 per month per £100,000 of outstanding mortgage. But we're hearing that interest rates could rise even higher in the year ahead."
Mr Lewis said there was "clearly an argument" over rising rates which he said posed risks of further price increases. "If we pump more money into the economy such as by giving tax cuts, not doing the corporation tax rise, such as by helping people with their energy bills, many economists would argue that would put up inflation.
"The only tool the Bank of England has to deal with inflation is interest rates." Mr Lewis added that it was "frustrating" that what he believed were supply-side issues in the economy weren't being tackled in a more collaborative way, instead saying the Bank of England was trying to reduce demand.
"It's supply of goods the prices are going up, [but] the only tool the Bank of England has is to reduce demand by lowering interest rates. The new prime minister tends to say that's the Bank of England's job on interest rates. Well I prefer to think we need to have a joint economy - the Bank of England, the FCA regulator and the government all need to work together.
"We don't appear to have inflated demand, we appear to have inflated supply." To get the latest money news straight to your inbox, subscribe to our dedicated newsletter here.
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