The Bank of England (BoE) is set to announce whether it decided to increase interest rates in the country this week.
Previously, the bank voted in favour of raising the Base Rate, which affects rates all across the country, for the 11th consecutive time. It resulted in the base rate soaring to 4.25 per cent - the highest its ever been since the early stages of the 2008 financials crisis when it topped 4.5 per cent.
Now, there are concerns among econimists that the BoE could raise the Base Rate again, driving it up to its historic peak when they meet on Thursday, May 11. Economists at Oxford Economics said they expect another 0.25 percentage point increase on Thursday.
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Chief UK economist Andrew Goodwin said: “Ahead of the May meeting, the Monetary Policy Committee (MPC) can justifiably argue that the criteria for tightening monetary policy further, that it set out in the March policy statement, have been met: the labour market is still tight and wage growth and services inflation remain stubbornly high.”
Laith Khalaf, head of investment analysis at AJ Bell, said the inflationary picture is not “benign” in the UK. “CPI still stands in double digits, which means that everyone is expecting a rate hike from the Bank of England at the forthcoming policy meeting.
“In stark contrast to the US, markets are then expecting one further rate hike, possibly two, to be pushed through. The UK’s headline inflation rate is running around twice that in the US, so it’s easy to see why we might have to swallow another few doses of monetary medicine.”
How a rise in the Base Rate will affect you
The rise in interest rates will have a direct effect on those with a loan or a mortgage with a variable interest rate. From today, you may notice the cost of your repayments going up.
However, if you're on a fixed rate, you won't see any changes to your payments until the end of your fixed period. If you're concerned about how high your monthly payments could go up, you can use a mortgage calculator to better prepare yourself.
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