Bank of England raises interest rates again
As expected by many analysts and million of homeowners, the Bank of England announced a fourth interest rate rise in the space of nine months earlier this week. Many had predicted that the interest rate would go up by 0.5% taking the base rate to 5.75%. However, the rate rise was lower than some expected at 0.25% taking the base rate to 5.5% - a full one percent higher than it was in August of last year. Interest rates have gone up by 0.25% on four occasions in the last nine months.
Although the hike in interest rates means that mortgage payers will now have to increase repayments if they are on a variable rate deal – someone with a mortgage of £100,000 will see a rise of around £16 per month – the move was necessary in order to try and gain control of the spiralling rate of inflation according to analysts. The 2% target for inflation has been exceeded, with the CPI breaking through the 3% barrier for the first time in a decade.
Experts are also predicting that there are more interest rate rises still to come in the second or third quarter of the year. Some think that the interest rate will have to rise more steeply in order to try and curb rising inflation, with some analysts expecting the rate of interest to rise to over 7.5%. However, many think that the next rise – predicted for around July or August – will be another 0.25% rise, which will take the interest rate to 5.75%. The most recent rise has taken borrowing to its highest since 2001.
Analysts state that once inflation starts to come down, interest rates will also start to fall, and homeowners can then look forward to lower repayments. However, there are mixed predictions with regards to how high the interest rate will have to go before inflation starts to come back under control.
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