Interest rates

Bank of England set to raise interest rates to 3% – ‘Expensive for mortgage borrowers!’ | Personal finance | Finance

The central bank’s Monetary Policy Committee (MPC) is due to meet on Thursday, November 3, next week. During this meeting, the Bank of England group will discuss whether or not to raise the UK base rate to fight inflation.

One of the consequences of this will be an increase in interest rates which will be “expensive for mortgage borrowers”, according to analysts.

As it stands, the country’s Consumer Price Index (CPI) inflation rate is 10.1% and is expected to remain high for the foreseeable future.

Over the past two months, the Bank of England has raised the base rate which is now at 2.25%.

Following the political and economic turmoil that resulted from former Prime Minister Liz Truss’ short-lived prime minister, another interest rate hike is expected next week.

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Some experts believe a 3% increase is on the table, as the current cost of living crisis puts unprecedented pressure on households.

While this will allow savers to increase their returns, those with mortgages and debt repayments will likely have to pay more.

Concerns have been raised over whether the continued rise in interest rates will do more harm than good and are merely attempts to stave off the nation’s expected possible recession.

Laith Khalaf, head of investment analysis at AJ Bell, shared the current interest rate outlook.


Mr. Khalaf explained: “As for the immediate policy decision, the market now expects interest rates to rise by 0.75% at the next meeting.

“The postponement of the new Chancellor’s budget statement will likely encourage the Bank’s rate setters to be cautious with their November interest rate hike, as they will still miss much of the economic picture.

“The Bank will still be able to adjust its monetary policy at the December meeting if necessary, when the full scope of the government’s fiscal plans will be unveiled by the autumn statement.”

Originally, the government’s budget update was due to take place ahead of the Bank of England’s announcement on October 31, 2022.

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However, it has now been pushed back to November 17 and will be delivered by new Chancellor Jeremy Hunt.

This financial update will likely take into account the outcome of the base rate announcement, along with the latest inflation figures, to determine the government’s course of action.

According to Mr Khalaf, interest rates will rise further in the UK as the country’s cost of living problems look set to continue.

The financial expert added: “Looking further ahead, the trajectory of UK interest rates is quite breathtaking.

“Especially considering that early last year the Bank of England warned of the possibility of negative interest rates.

“Last November, the base rate was still at 0.1% and the central bank expected inflation to peak at 5% in April this year.

“Now markets are pricing a base rate of 5% in 2023, and CPI inflation is at a distinctly uncomfortable 10.1%.”