Interest rates UK today: Mortgage warning as Bank raises rates to highest level since 2008

Thomas Jackson, Managing Director for Cooper Associates Mortgages, said the interest rate rise will affect the property market, with mortgage 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.“

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.”

The pound was little changed by the quarter percentage point interest rate rise, which was widely expected by economists.

Sterling stood 0.2% lower at 1.26 US dollars and was 0.2% higher at 1.15 euros.

The Bank of England is “rightly concerned” that higher inflation could become “entrenched”, CBI deputy chief economist Anna Leach said.

“The MPC has again been driven to raise rates by stubbornly high inflation, ongoing strength in wage growth and better-than-expected activity. With inflation having been at or above 9% for a full year, the Bank are rightly concerned that higher inflation could become entrenched,” she said.

“The future path for interest rates is as yet uncertain. With ongoing bouts of banking sector turbulence in the US, risks to financial stability seem likely to persist as global interest rates continue to ratchet up and the full impact of past rises continues to feed through.

“While credit costs have so far adjusted smoothly, further material turbulence could yet disrupt activity, requiring a looser monetary stance. On the other hand, inflation could surprise to the upside, particularly if wage rises remain elevated, suggesting further rate rises.”

Shadow chancellor Rachel Reeves repeated concerns that people will be “wracked with anxiety” after an expected rise in interest rates was confirmed.

“People will be wracked with anxiety by this news. The (Prime Minister) must admit his responsibility for the Tory mortgage penalty leaving so many worse off,” Ms Reeves said.

“We need a proper windfall tax on oil and gas giants now to ease the cost of living.”

SNP spokesman Stewart Hosie MP said Scottish families would be “paying the price for Tory failure” after another rise in interest rates was announced.

He said: “Millions of Scottish families are paying the price for Tory failure as the cost of living soars – showing exactly why Scotland needs independence to escape the damage of Westminster control.

“The SNP is the only party offering a real alternative. The Tories and pro-Brexit Labour Party are making the cost of living worse by imposing cuts and a hard Brexit that’s harming the economy.

“With interest rates rising, yet again, households across Scotland are being forced to foot the bill for this Tory mortgage premium, with payments increasing by hundreds of pounds.”

Members of the Bank of England’s Monetary Policy Committee (MPC) said there had been “repeated surprises about the resilience of demand” amid rising interest rates.

The Bank also said that inflation had been stronger than expected as the price of food and other goods were higher.

Two out of seven of the members of the MPC wanted to keep rates unchanged, saying that inflation was already expected to fall considerably this year without the need to rise the rate again.

They also said a lot of the impact of rising rates has not yet come through into the economy. The Bank estimates that around a third of the impact of rates increases has been passed through.

UK inflation is expected to fall slower than previously thought as food prices remain stubbornly high, the Bank of England has said, as it raised interest rates for the 12th time in a row.

Seven members of the Bank’s Monetary Policy Committee (MPC) voted to increase the base interest rate to 4.5% from 4.25%.

Food prices have stayed higher for longer than expected, the Bank 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.

It means Consumer Prices Index (CPI) inflation is expected to decline less rapidly than the Bank predicted in its last report in February.

Inflation is still expected to drop sharply from April this year, as energy prices decline and household bills are subsidised, the MPC said.

“There remain considerable uncertainties around the pace at which CPI inflation will return sustainably to the 2% target,” it added.

Policymakers said base rates will move from 4.25% to 4.5%, representing a 0.25 percentage point increase.

It is the highest level since 2008, amid soaring inflation, and threatens higher bills for hundreds of thousands of homeowners.

Alastair Jamieson reports: