‘No Christmas cheer from the Bank’ as interest rates soar to 14 year high, which will cause ‘misery for millions of homeowners’

The Bank of England (BoE) has raised interest rates to a 14 year high in the ninth consecutive rise in an attempt to tackle inflation.

The monetary policy committee (MPC) made the decision to raise the bank rate to 3.5% from 3% even though inflation ease in November.

The slow down in the rate of inflation was “not sufficient” to prevent the bank raising interest rates by 0.5%.

Most of the MPC’s nine members warned that they will continue to vote for rate rises if the economy continues to develop as they are expecteing.

The BoE said, “The majority of the committee judged that, should the economy evolve broadly in line with the November Monetary Policy Report projections, further increases in Bank rate might be required for a sustainable return of inflation to target.”

Adrian Anderson, Director of property finance specialists, Anderson Harris told LondonLovesProperty.com, “The Bank of England has met market expectations and followed the US Fed in raising base rate by 0.5% today, taking it now to 3.5%.

“Although this rise is smaller than the “mega hike” in November, this is still one of the biggest rate increases in the last decade.

“This rise, with gas prices increasing further due to the cold snap, is piling misery on millions of homeowners on variable rate mortgages and other forms of debt. This coupled with wide ranging tax rises to come in April 2023 puts huge pressure on households already struggling with rising prices.

“Although there is certainly no Christmas cheer from the Bank of England this year for borrowers, the fact that the size of the hike is down 0.25% on the previous increase, coupled with lower inflation figures released yesterday, means that we may be seeing the start of the end of the rate hike cycle with the market now pricing a terminal rate (top rate) for base at 4.5%, down from previous Armageddon predictions of 6-6.5% post mini-budget.

“Two members of the Monetary Policy Committee actually voted for rates to stay at 3% due to concerns about the state of the economy, with only one voting for 0.75%.

“With China u-turning on its zero COVID policy and the hope of a resolution for the war in Ukraine, the outlook for rates in 2023 looks mixed.

“There may be significant pressure on the Bank of England to reduce interest rates in order to try and stimulate growth in the second half of next year if inflation is under control and the UK does enter the longest recession in history.

“However with wages also rising in the private sector and a very tight labour market, inflation is predicted to remain well above 2% target for much of the next 12 months.”