Latest Bank of England interest rate announcement looms as UK braces for fresh hike

Close Martin Lewis addresses inflation rates unexpectedly falling The Bank of England is set to make a further announcement on interest rates , as markets and consumers brace for a 14th consecutive rise in the cost of borrowing . The central bank is widely expected to raise its base rate by a further 0.25 points to 5.25 per cent on Thursday, the highest level since February 2008, as part of its ongoing bid to tame inflation by cooling Britain’s economy. Such a move would be lower than the shock hike of 0.5 per cent announced in June, and comes after the latest inflation statistics suggested price rises had finally slowed by a greater margin than anticipated. Consumer Prices Index (CPI) inflation was 7.9 per cent in June, down from 8.7 per cent in May and the lowest rate since March 2022, according to official figures from the Office for National Statistics (ONS). As a result, some economists now believe an end to the cycle of hiking interest rates may be in sight, with the base rate potentially peaking at around 5.75 per cent this year. Bank of England expected to hike interest rates to 5.25% Economists eye an end to lengthy cycle of rate increases Rishi Sunak believes ‘light at end of the tunnel’ on inflation 1691037002 Investec Economics has predicted the Bank of England will opt for a larger-than-expected 0.5 percentage point increase on Thursday. But the firm expects it could be followed by a final quarter-point hike the following month before the cycle of interest rate rises comes to an end. Laith Khalaf, head of investment analysis at AJ Bell, said: ‘The market is now expecting interest rates to top out at 5.75 per cent or 6 per cent by the end of the year, so has already pared back its bets from the height of inflationary panic when rates north of 6 per cent were envisaged. ‘The Bank is still walking a tightrope though, as it tries to tame inflation without breaking the housing market.’ Namita Singh 3 August 2023 05:30 1691033402 In addition to its interest rate announcement, the Bank of England’s Monetary Policy Committee will draw up fresh economic forecasts on Thursday – which economists will also be closely watching. Namita Singh 3 August 2023 04:30 1691031602 The Bank of England’s looming announcement likely means those with mortgages are ‘not out of the woods’ yet, a broker has said, after data showed house prices fell in July by their largest margin in 14 years. Mark Harris, chief executive of mortgage broker SPF Private Clients, said: ‘With another 25 basis points interest rate rise expected from the Bank of England later this week, we are not out of the woods just yet when it comes to rising mortgage costs. ‘However, a few lenders, including HSBC, Barclays and Nationwide, have reduced their fixed-rate mortgage pricing on the back of better-than-expected inflation news. This has led to a calming of swap rates, which underpin the pricing of fixed-rate mortgages, after weeks of considerable volatility.’ The price of a typical home is now 4.5 per cent below the August 2022 peak, Nationwide said this week. Noting that ‘investors’ views about the likely path of UK interest rates have been volatile in recent months’, Robert Gardner, Nationwide’s chief economist, said: ‘There has been a slight tempering of expectations in recent weeks but longer-term interest rates, which underpin mortgage pricing, remain elevated. ‘As a result, housing affordability remains stretched for those looking to buy a home with a mortgage.’ The price of a typical home is now 4.5% below the August 2022 peak, Nationwide Building Society said. Namita Singh 3 August 2023 04:00 1691029800 Hi, and thanks for joining us on the liveblog, as the Bank of England’s latest announcement on interest rates looms. The central bank is widely expected to raise its base rate by a further 0.25 per cent on Thursday morning – in what would mark the 14th consecutive rise to the cost of borrowing. The rise to 5.25 per cent would mark the highest level interest rates have hit since February 2008. Most economists think Bank of England will raise bank rate by 0.25 percentage points on Thursday Namita Singh 3 August 2023 03:30