The Bank of England has lifted UK interest rates to 4%, the highest level in over 14 years as the economy continues to battle with inflation.
This is the 10th meeting in a row at which the Bank’s Monetary Policy Committee has voted to raise UK borrowing costs.
The increase from 3.5% puts more pressures on mortgage payers and businesses struggling to pay off their loans.
“The Bank of England had to “go big” again today, raising interest rates to their highest level in over 14 years to 4% in the battle against inflation.
Adrian Anderson, Director of property finance specialists, Anderson Harris said, “Inflation stood at 10.4% in December 2022, just below its 41-year peak in October 2022. The cost-of-living crisis continues and 2023 will most likely see households face some of the most challenging conditions for living standards on record.
“Today’s rise to 4% was universally expected as inflation is not yet under control. The question now is will the Bank of England base rate stay at this level or rise further, peaking at around 4.25% or 4.50%? And then how long it will have to stay at these levels to ensure inflation is under control? It’s a fine balancing act.”
Mortgage shock for millions
He added, “It’s almost impossible to remember that the Bank of England base rate stood at just 0.1% in December 2021. Some 1.8 million mortgage holders will see their fixed rate deal finish in 2023 and are yet to feel the impact of rising interest rates.
“These homeowners, along with the estimated 2 million on variable rate deals are likely to have a mortgage shock and face a significant increase in their payments at the same time as most of their other outgoings have increased markedly.
“Only a very small number of mortgage holders are currently behind on their mortgage payments but there is risk this number could rise as homeowners move onto much higher mortgage rates. Homeowners are in a very different place to the ‘old normal’ of the last 14 years.”
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