The Bank of England’s Monetary Policy Committee is widely expected to vote through its fourteenth consecutive rise later today.
If it does, it will take the cost of borrowing above 5% and to its highest rate since the financial crisis in 2008.
Those on variable rate mortgage are in line for more pain and it is bad news for those coming off low fixed rate deals too.
Analysts are split on how far the BoE will raise the base rate today – most predict a quarter-point rise to 5.25% but others forecast of a half-point hike to 5.50%.
In June the MPC opted for a half-point move in an effort to cool inflation, which has eased to around 7.9% from its 11% highpoint in October.
This is still a long way from the BoE’s 2% inflation target so the MPC may decide to repeat the half-point rise it introduced at its last meeting.
The MPC’s consecutive base rate rises have resulted in soaring UK fixed-rate mortgage costs.
According to Moneyfacts, the average two-year fixed residential mortgage rose to 6.66% in early July, the highest level since the 2008 financial crisis. In recent weeks some lenders have lowered mortgage rates on the back of an improved outlook for inflation. The question is what next?
Not everyone supports the incremental increase in rates the MPC has followed.
Earlier this week Family Building Society chief executive Mark Bogard argued that historians will look back at all these mini rate rises as an act of insanity.
“Once rates needed to rise, the steps should have been larger but fewer of them. Then they need time to see if they are achieving the desired result.
“What can you really learn every six weeks?”
Bogard believes the MPC to hold the base rate steady on Thursday “and see where we are in six months”.
The consensus across the industry is that this scenario is extremely unlikely – we will know soon enough.
