Bank of England set to announce biggest interest rise in 33 years

The Monetary Policy Committee, which decides the official interest rate in Britain, are to meet and make a decision which could see a rise in mortgage rates at a time British households are facing the cost of living crisis. The Committee may be planning to push the current 2.25 percent interest rate to 3 percent, which would be the highest since the financial crisis of 2008.If the interest rate rises by 0.75 percent, it would see the biggest single increase since 1989.In October, markets predicted the interest rate could rise as much as one percent but this seems to have changed since Liz Truss stepped down as Prime Minister.Andrew Bailey, the Governor of the Bank of England, said the interest rate increase would likely to bigger than the previous 0.5 percent increase that set inflation to 2.25 percent.He said: ‘As things stand today, my best guess is that inflationary pressures will require a stronger response than we perhaps thought in August.’ The Bank of England is expected to announce the biggest interest rates since the 1980s (Image: Getty Images) Andrew Bailey has said he interest rate increase would likely to bigger than the previous increase (Image: Getty Images)Deutsche Bank analysts have predicted the Bank of England will decide on a 0.75 percent rise with a split vote of the committee.They said they expect the latest economic report, which will also be announced on Thursday to show that ‘the economic outlook has deteriorated further’.The experts added: ‘Conditioned on market pricing, the UK economy will likely fall into a deeper and more prolonged recession.’James Smith, a developed markets analyst at ING, had a similar prediction and said: ‘The new set of forecasts due, which crucially are based on market interest rate expectations, are likely to be dismal – showing both a deep recession and inflation falling below target in the medium term,’That should be read as a not-so-subtle hint that market pricing is inconsistent with achieving its inflation goal.’READ MORE: Biden’s $13B package branded ‘cynical’ ahead of midterms It’s been predicted that housing prices would continue to fall in the upcoming months (Image: Getty Images)The committee meeting comes at a time house prices fell by 0.9 percent last month, according to data from the Nationwide Building Society.The average price of a British home has fallen to an average of £268,282, and the annual growth in house prices decreased from 9.5 percent to 7.2 percent.The building society predicted that housing prices would continue to fall in the upcoming months as interest rates continue to rise.Robert Gardner, the chief economist at Nationwide, said: “The market has undoubtedly been impacted by the turmoil after the mini-budget, which led to a sharp rise in market interest rates.”He said: “Higher borrowing costs have added to stretched housing affordability at a time when household finances are already under pressure from high inflation.”DON’T MISS: Russian conscripts erupt at officials as Kremlin scraps £4.2k payment  [REPORT]Joe Biden blames ‘war in Iraq’ for global inflation in latest blunder [REVEAL]’Sunak right to boycott COP27 – his job is to sort BRITAIN out’ [INSIGHT] Jonathan Hopper said the aftermath of the mini-budget “left both buyers and sellers shaken” (Image: Getty Images)Kwasi Kwarteng’s mini-budget announcement to cut tax on high earners increased mortgage rates after markets became uncertain about how the Goverment would pay for the .new tax cuts.The economic instability led to former prime minister Liz Truss stepping down after she replaced the former Chancellor with Jeremy Hunt.The increase in mortgage rates means that first-time buyers earning an average wage with a 20 percent deposit would experience a rise in their monthly mortgage payments of 34 percent.The CEO of Garrington Property Finders, Jonathan Hopper, said: ‘The chaotic aftermath of the mini-Budget sent tremors through the property market that left both buyers and sellers shaken.’The worst of it is, we’re likely to feel the aftershocks for months to come.’