he Bank of England hiked base rate by a quarter of a percentage point to 5.25 per cent on August 3, its 14th consecutive increase. As a result, the cost of borrowing in the UK will increase to its highest level since the 2008 financial crisis.
Anybody with a variable-rate mortgage will pay more each month and first-time homebuyers and people switching from fixed-rate mortgages will pay more for new home loans as well.
Charles White Thomson, the CEO at Saxo UK, said: “The full extent of this has yet to be seen, as with inflation there is lag, including mortgage holders who are rolling off unprecedented super cheap deals. Monetary policy setters, especially in the UK, have a highly difficult conundrum to solve – defeat inflation with the blunt weapon that are interest rates without breaking the economy and consumer.”
However, the hike was smaller than the half-point “jumbo hike” last month, signalling that Threadneedle Street is slowing down in its battle with inflation.
When is the next interest rates announcement?
The Monetary Policy Committee announces any change in interest rates every six weeks and the next will be on September 21.
The committee will share its summary and minutes, including the current interest rates.
Will interest rates go up?
Interest rates are expected to increase again. Find out more about why interest rates rise in our guide.
However, with the base rate perhaps reaching 5.75 per cent this year, several analysts think the cycle of rising interest rates may be coming to an end.
According to the Office for National Statistics, the Consumer Prices Index inflation rate was 7.9 per cent in June, down from 8.7 per cent in May and the lowest level since March 2022.
Since December 2021, the Bank of England has increased base rate from 0.1 per cent to five per cent.