Bank of England raises interest rates to keep inflation under control: Mortgage payments to go up for those on tracker
Thursday 2 February 2023 10:28 PM UTC
LONDON Feb 2: Bank of England (BoE) has hiked interest rates in order to keep inflation under control. BoE raised key interest rate by 50 bps to 4 per cent, highest since October 2008. This was also the tenth hike in a row.
The BoE has the responsibility to keep inflation under control. In December 2022, the inflation in the UK hit 10.5 per cent. BoE’s Monetary Policy Committee (MPC) has the base interest rate to use as a tool to ease soaring inflation.
The Bank has been putting up interest rates in a bid to tackle the soaring cost of living.
When interest rates rise, about 1.6 million people on tracker and variable rate deals usually see an immediate increase in their monthly payments.
The increase in the Bank rate from 3.5% to 4% means those on a typical tracker mortgage will pay about £49 more a month. Those on standard variable rate mortgages face a £31 jump.
This comes on top of increases following the previous recent rate rises. Compared with pre-December 2021, average tracker mortgage customers will be paying about £382 more a month, and variable mortgage holders about £240 more.
Forecasts suggest that they could start to come down again from the summer. The Bank of England’s governor, Andrew Bailey, may address those forecasts later.
A hike in interest rate is perceived as a measure to keep inflation under control. Banks use base rates to decide the interest rate to charge borrowers and pay savers.
When BoE raises interest rates, borrowers have one question in mind whether their interest rates would go up or not.
Generally, tracker mortgage directly follows the base rate. However, fixed-term mortgage does not.
The BoE has hinted that the UK was nearing the peak interest rates. However, if the inflationary pressures persist, then the BoE may announce further hike, as per a report in Evening Standard.
The forecast comes as interest rates were raised to 4% from 3.5%, their highest level in over 14 years.
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