The Bank of England is expected to hike interest rates this week, with the benchmark rate potentially rising to 2% by September.
On Thursday, the base rate is projected to climb from 1% to 1.25 percent, however some analysts believe it could move even higher — to 1.5 percent.
The increase will pave the way for a series of rate hikes this summer, dealing another blow to household budgets.
Any rate hike this week, which would be the fifth in as many months, would be the longest streak of rate hikes in 25 years.
If the rate rises to 2% in the autumn, a typical £150,000 mortgage will cost £87 per month, while a £250,000 mortgage will cost £146 per month.
Increased mortgage expenses would be onerous for millions of people who are already dealing with increased food, fuel, and energy prices, as well as higher taxes.
Analysts have warned that ‘the era of cheap money is coming to an end,’ which will come as a ‘huge body blow’ to many mortgage-holding households.
It’s also anticipated that rising interest rates, combined with rising costs and taxes, will send the economy into a tailspin.
Boris Johnson has been urged to lower taxes in order to relieve financial strain on families, stimulate industry and the economy, and save his job.
The Bank of England’s economic management has also come under assault in recent months as inflation has risen above its 2% objective.
Inflation in the United Kingdom is at a 40-year high of 9% and is predicted to reach 10% later this year as global prices rise.
The news will come as a shock to millions of people who have previously benefited from low borrowing costs. Prior to the recent rate hikes, rates had been so low for so long that 10 million Britons had never witnessed an increase of more than 1%.
‘The age of cheap money is coming to an end, and it looks like it’ll be a terrible goodbye for many of us,’ said Laith Khalaf, head of investment analysis at AJ Bell.
In order for rates to reach 2% in September, the Bank of England will have to go beyond its usual 0.25 percentage point hikes.
Because the rate-setting Monetary Policy Committee (MPC) only meets three times between now and then — this week, in August, and in September – this is the case.
As a result, economists anticipate two 0.25 percentage point rate hikes and one 0.5 percentage point boost – or 50 basis points in City speak.
This would be the most significant rise since the Bank’s independence in 1997.
‘The Bank of England will hike interest rates by 50 basis points on Thursday,’ said Paul Dales, chief UK economist at Capital Economics. Even if we’re incorrect – and it’s a tough call – recent events confirm our prediction that rates will rise to 3% next year.’