Interest rates – live: Mortgage warning as Bank raises rates to highest level since 2008

Experts have warned the rise will affect the property market, with lenders already raising their rates

Bank of England expected to raise interest rates for 12th time in a row

Experts have warned of mortgage increases after the Bank of England hiked up interest rates to the highest level since 2008 amid soaring inflation.

Rates have risen from 4.25 per cent to 4.5 per cent, representing a 0.25 percentage point increase, as the Bank of England aims to bring UK inflation down to its 2 per cent target.

Thomas Jackson, Managing Director for Cooper Associates Mortgages, said the rise will affect the property market, with lenders already raising their rates.

He said: “This next increase will have further consequences on homeowners and home buyers. Anticipating today’s rise, mortgage lenders have already raised their rates.

“Those on tracker mortgages and standard variable rates (SVR), are likely to see their monthly payments increase. The average SVR is now above 7%, its highest since 2008. Those on fixed mortgages are ok for the time being but anyone due for remortgage soon should put talking to a mortgage adviser to the top of their list. “

It comes as UK Consumer Prices Index (CPI) inflation remained firmly in double digits in March.

Key Points

• Interest rates rise to highest level since 2008 to curb inflation
• Warning mortgages could increase as Bank raises rates
• Savings rates offered by banks at their highest since financial crisis
• Why are interest rates going up – and how does raising them help inflation?

[11 May 2023 12:37 · Martha Mchardy]

Lib Dems call on Chancellor to resign amid interest rates rise

The Liberal Democrats have called on chancellor Jeremy Hunt to resign if he fails to meet his inflation target and help lower food bills soon after another rise in interest rates was announced.

“This is a hammer blow to struggling families who simply can’t balance the books with these endless price rises,” said Sarah Olney MP.

“With mortgages and inflation remaining at sky-high levels, Jeremy Hunt is frankly failing at his job. He was set one main goal, which was to bring down prices, yet today confirms he is nowhere near achieving that.

“The deadly rise in food prices is to blame for this cost-of-living crisis yet the Chancellor refuses to act.

“If Jeremy Hunt doesn’t meet his self-imposed inflation target and bring down food bills soon then he must go. Families and pensioners just want an end to the cost-of-living crisis, yet Jeremy Hunt looks the like yet another Chancellor who isn’t up to the task.”

[11 May 2023 12:49 · Martha Mchardy]

Economy could grow this year amid fall in energy prices, says Bank of England governor

Andrew Bailey, governor of the Bank of England, has said the fall in energy prices and stronger-than-expected economic activity means the economy might grow this year.

“The outlook for growth and unemployment has improved,” he said on Thursday.

“Six months ago, we were expecting a shallow but long recession. Since then, energy prices have fallen substantially and economic activity is holding up better than expected.

“Today we are forecasting modest, but positive, growth and a much smaller increase in unemployment.

“We think inflation will fall quite sharply over the coming months, beginning with the April number to be released in two weeks’ time.

“Energy prices have fallen from their peaks and that will now start to come through as lower inflation.

[11 May 2023 12:51 · Martha Mchardy]

Economy still on track to halve inflation by end of year, says Bank of England governor

Bank of England governor Andrew Bailey said the economy is still on track to halve inflation by the end of the year, along with Government promises.

“Looking ahead to the end of the year, the contribution from energy will fall further,” he said after the Bank raised interest rates from 4.25% to 4.5%.

Andrew Bailey (PA Wire)

He added: “In the fourth quarter of this year, if energy prices evolve as financial market prices now suggest, we can expect the typical household energy bill to fall to around £2,100.

“That is still a high number. But it is about 16% lower than the level a year before that when the Government’s Energy Price Guarantee was put in place.

“Since energy makes up around 5% of the consumer price index, that fall in the prices of electricity and gas, along with other fuels, translates into a contribution to overall inflation from energy of minus one percentage point towards the end of the year.

“It is not least for this reason that consumer price inflation is on course to halve by the end of this year - though to be very clear, our target is a sustainable return of inflation to 2%. That is what we focus on.”

[11 May 2023 12:55 · Martha Mchardy]

Interest rate rise ‘very disappointing for families with mortgages’, says chancellor

Chancellor Jeremy Hunt said: “Although it is good news that the Bank of England is no longer forecasting recession, today’s interest rate rise will obviously be very disappointing for families with mortgages.

“But unless we tackle rising prices, the cost-of-living crisis will only carry on - which is why we need to be resolute in sticking to our plan to halve inflation by the end of the year.”

[11 May 2023 12:57 · Martha Mchardy]

Still ‘uncertainties in outlook for the global economy’, Bank of England governor says

There are still uncertainties in the outlook for the global economy, Bank of England Governor Andrew Bailey has said.

“The pace at which inflationary pressures ease will depend on the evolution of the economy, including the impact of the significant increases in Bank rate so far,” he said.

“Uncertainties around the global financial and economic outlook remain elevated.

“The MPC (Monetary Policy Committee) will continue to monitor closely indications of persistent inflationary pressures, including the tightness of labour market conditions and the behaviour of wage growth and services price inflation.

“If there were to be evidence of more persistent pressures, then further tightening in monetary policy would be required.”

[11 May 2023 13:00 · Martha Mchardy]

Inflation ‘too high’ – but will come down soon, says Bank governor

Andrew Bailey, governor of the Bank of England, has said inflation “remains too high” and would fall more slowly than expected – but is still expected to fall “sharply” from April’s official figures.

The Bank said it expects inflation to reach just over 5.1 per cent by the final quarter of this year – which would mean Rishi Sunak would just manage to hit the pledge to bring inflation below 5.35 per cent.

The Bank had previously thought CPI inflation could fall as low as 1 per cent by the middle of 2024 but it is now predicted to reach around 3.4 per cent.

Food prices have stayed higher for longer than expected, the Bank also said, partly due to Russia’s war in Ukraine and poor harvests in some European countries, ramping up the cost of living for households across the UK.

[11 May 2023 13:03 · Martha Mchardy]

Bank ‘should have held off raising interest rates’, claims think tank

The Bank of England should have held off raising interest rates again, the IPPR think tank has said, warning of a “continued increase in inequality”.

Carsten Jung, senior economist at IPPR, said: “The Bank of England should have held off raising rates. The current approach risks creating big economic costs, in the form of lower future growth and fewer jobs, while not actually being effective enough at bringing down inflation.

“There will be a continued increase in inequality as a result of this: many on low incomes, who are already the ones whose wages are least keeping up with inflation, are the ones hardest hit by lower growth caused by further rate increases. Meanwhile, many firms are comfortably keeping up their profit margins.

“Instead, we need a more balanced set of policies - including more fiscal policy action - to address the persistence of inflation. This should involve further price support measures to lower energy prices, excess profits taxes to disincentivise excessive price increases, and income support to help smooth out wage adjustments.”

[11 May 2023 13:04 · Martha Mchardy]

Fall in energy prices a major ‘positive’, says governor

Bank of England governor Andrew Bailey said the economy is more “resilient” than expected, as economists at the Bank released a record upgrade to their growth forecasts in a big boost to hopes of avoiding a recession.

The Bank now expect that gross domestic product (GDP) will not fall during a single quarter this year. In February, the committee believed the economy could fall into a shallow recession starting from the first three months of the year.

Now it expects GDP to rise by 0.25 per cent this year before a 0.75 per cent increase next year and the year after. It had previously forecast a 0.5 per cent fall this year.

Mr Bailey has said a drop in energy prices explains part of the Bank’s upgrade to its outlook for the UK’s economy. “There has been a substantial fall in energy prices.

“The biggest news has been the very substantial fall in gas prices and that does feed through, clearly, and that’s fed through in a positive way,” he said.

[11 May 2023 13:16 · Martha Mchardy]

Food prives have peaked, claims Bank of England deputy governor

Bank of England deputy governor Ben Broadbent said it appears food price inflation has peaked, despite being higher than expected in recent months.

“For food output, price inflation hasn’t come down as much but it does seem to have peaked. You see the same in other countries,” he said.

“If you look at the input prices for food producers, that rate of inflation has been falling for several months.”

[11 May 2023 13:24 · Martha Mchardy]

£5,000 annual increase in cost of mortgage for some borrowers, expert claims

Homeowners whose mortgages directly track the base rate face a total average annual bill hike of around £5,000, following 12 consecutive hikes in the Bank of England base rate.

The average monthly tracker rate mortgage payment will increase by £23.71 following Thursday’s base rate hike, according to calculations from UK Finance.

Homeowners on a standard variable rate (SVR) mortgage meanwhile will pay around £15.14 more per month typically, assuming that the lender passes the full base rate rise on to the borrower.

Borrowers often end up on their lender’s SVR when their initial mortgage deal comes to an end and SVRs are set by individual lenders.

Over the course of the series of rate hikes, which have taken the base rate from 0.1% to 4.5%, the average monthly tracker mortgage payment has increased by £417.36, according to UK Finance’s calculations.

This adds up to around £5,008 more per year for homeowners on trackers.

The average SVR payment has jumped by a total of £266.48 per month, which adds up to around £3,198 more annually.

Around four-fifths (81%) of outstanding mortgages are fixed-rate deals. Mortgage borrowers in this group will not feel the immediate impact of base rate rises until their deal ends.

Rachel Springall, a finance expert at Moneyfactscompare.co.uk, said: “Those aiming to lock into a fixed-rate mortgage for peace of mind will find average rates have come down slightly over the past month, but as rates average around 5%, this may still be unaffordable for some.

“The average five-year fixed mortgage rate is lower than the two-year fixed, which may encourage prospective borrowers to lock down their rate for longer.

“However, fixed mortgage rates could be unpredictable in the months to come, so some borrowers may even sit on their revert rate waiting for cheaper deals to surface.

“Whether fixed rates are destined to remain volatile or not, there is still an incentive for borrowers to fix, as the consecutive base rate rises have pushed the average standard variable rate to its highest point since 2007.”