For the 14th time, the Bank of England is expected to increase interest rates

Today, the Bank of England is prepared to increase the rate of interest for the 14th time in a row, raising concerns regarding the impact it would have on several households.

As per economists, the Bank of England will increase the rate of interest by 0.25% to 5.25% and announce it by midday.

However, the Bank’s Monetary Policy Committee (MPC) resisted expectations by raising the interest rate by 0.5 percentage points more than predicted in June. Some others believe it could happen again.

Although, as Governor Andrew Bailey expressed, the rate increase will help reduce inflation in the UK, many critics are skeptical about it.

An increased rate of interest means higher borrowing costs, which affect the monthly mortgage payment for several homeowners. It will also mean tenants have to pay higher rents.

Regardless, it will encourage better rates for savers, but concerns are raised as many banks do not pass such benefits entirely on to their customers.

The Bank of England’s “shock” interest rate boost in June came after inflation failed to decrease as expected, remaining at 8.7% in the year to May.

However, inflation fell more than anticipated the next month, to 7.9%.

The last occasion when the bank base rate was at 5.25% was in March 2008, 15 years ago.

The MPC’s statement will be widely monitored for its influence on the property market and the economy as a whole, amid concerns that higher interest rates could lead to the UK’s recession.

Property values fell by 3.8% in July, according to the Nationwide Building Society, the largest drop in 14 years. It attributed the decline in demand to mortgage affordability.

On Monday and Tuesday, the average two-year fixed home mortgage rate was 6.85%, according to Moneyfacts.

The average five-year fixed home mortgage rate for the same period was 6.37%, according to the financial information business.

As per a survey of analysts, the interest rate will be raised by 0.25% points on Thursday, with a 36% likelihood of a 0.50% point hike.

But Moneycorp’s Joseph Calnan suggested it was “anyone’s guess” exactly what the MPC would do.

He stated, “For the first time in a long time, we’re unsure what to expect at this next meeting. We could see a 50 bps [basis points] hike, a 25 bps hike, or even no change at all given [that inflation] finally eased off in June after a stubborn 11 months.”

- Published By Team Timeswire

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