Bank of England Interest Rate Hikes to 5 Percent
The Bank of England has raised interest rates by 4.5 to 5 per cent as it intensifies its efforts to tackle stubbornly-high inflation, adding to the strain on households struggling with soaring mortgage costs.
According to the report, financial markets were evenly split on whether the Bank would vote for a half-point increase or a lower quarter-point increase before the decision was revealed. The Bank of England’s monetary policy committee raised interest rates for the 13th time in a row, to the highest level since April 2008,
The latest rise in borrowing prices comes after numbers released on Wednesday showed that inflation stayed constant in May at 8.7 percent, fueling anticipation that the central bank will be forced to act. Inflation was forecast to fall to 8.4 percent, still significantly above the Bank’s target of 2%.
It also puts additional pressure on the government, as UK Prime Minister Rishi Sunak faces calls to act to help mortgage holders facing skyrocketing expenses, either directly or by persuading lenders to be more accommodating, according to The Guardian.
Many homeowners were bracing for another increase in borrowing prices after high-street lenders raised the cost of new home loans ahead of Thursday’s rate decision. Millions of mortgage holders are set to see their payments skyrocket after lenders pushed the cost of a typical two-year fixed-rate home loan beyond 6%, the highest level since Liz Truss’ failed mini-budget last October.
According to The Guardian, more than a quarter of mortgage holders are projected to see their low-interest rates expire, leaving millions of people facing a “mortgage timebomb” of rising borrowing costs. Borrowing costs have steadily increased since the Bank began hiking interest rates from a historic low of 0.1% in December 2021.
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