Interest rates – live: Mortgage holders under ‘storm clouds’ after Bank’s latest hike

“Storm clouds are building” over the heads of mortgage holders after the Bank of England raised interest rates to a 15-year-high, debt experts have said.

The Bank hiked its base rate up to 4.25 per cent in the 11th consecutive rise since the historic lows of the pandemic era, which followed yesterday’s shock jump in inflation.

Predictions that members of the Monetary Policy Committee would hold rates over fears of exacerbating a recent banking crisis were not borne out by the 7 to 2 vote for a 0.25 per cent increase.

Responding to the move, Joanna Elson CBE, chief executive of debt charity the Money Advice Trust, said: “Storm clouds are building for many households ... especially for those on variable rates or coming to the end of their contracts.”

She said renters would also feel the squeeze as landlords pass rates on to tenants.

Mortgage rates have fallen to a six-month low from their peak in the weeks after September’s “mini-Budget”, according to MoneyFacts.com. But, a spokesperson for the site said, today’s rate hike could cause lenders to reverse this drop.

Key Points

• ‘Storm clouds building’ for mortgage holders

• Bank of England hikes interest rates

• Moore: Bank may have to act on interest rates as inflation kicks the poorest hardest

Widest gap in UK between renting and buying home revealed – what’s cheapest in your area?

19:00 , Emily Atkinson

Renters pay more than first time buyers in almost every corner of the United Kingdom – though new data shows the gap has narrowed greatly in the era of rising interest rates.

The cost of a mortgage on a first home is typically around £42 per month cheaper than renting, but the difference has reduced and in some parts of the UK renting may be the less expensive option, analysis suggests.

Differences varied across the country, with Scottish renters getting the worst deal, while homeowners in the East of England have reason to be jealous of their northern counterparts.

My colleague Liam James reports:

UK map reveals what’s cheapest in your area - renting or owning a home

Why did the Bank of England raise interest rates and what will it mean for me?

18:00 , Emily Atkinson

On Thursday the Bank of England decided to put up interest rates once more as it continued to try to keep inflation under control.

It is the latest in a series of central bank decisions to increase interest rates in the last year or so.

But what does it mean for borrowers and savers, and what is likely to happen next? The PA news agency explores some of these issues here:

Why did the Bank of England raise interest rates and what will it mean for me?

Bailey ‘optimistic’ UK can avoid recession after rate rise

17:00 , Emily Atkinson

Bank of England governor Andrew Bailey said he is more optimistic that the UK can avoid a recession after being on a “knife edge” last month.

The Bank gave a surprise upgrade to its forecast for the UK economy, saying it now expects slight growth in the second quarter of the year having anticipated last month it would decline by 0.4 per cent.

It means the country would avoid imminently falling into a recession – which is defined as two consecutive quarters of negative growth.

Mr Bailey, said: “Back at the beginning of February, we were really a bit on a knife edge as to whether there would be a recession, certainly we thought the economy would be quite stagnant.

“I’m not saying it’s off to the races, let’s be clear, but I am a bit more optimistic.”

Tracker mortgages up £284 a year on average

16:00 , Liam James

Mortgage holders on deals which track the Bank of England base rate will see more than £284 per year added to their costs on average, following Thursday’s rate hike.

According to figures from trade association UK Finance, the latest Bank of England base rate increase, from 4 per cent to 4.25 per cent, will typically add £23.71 per month to the cost of a tracker mortgage.

Borrowers on a standard variable rate (SVR) meanwhile will see their costs increase by £15.14 per month – or more than £181 per year – on average if the rate hike is passed on by their lender.

Homeowners end up on SVRs when their initial deal comes to an end and the SVR is set by individual lenders.

‘We all know what it means’: Martin Lewis responds to rate rise

15:30 , Liam James

Martin Lewis offered a weary response to the Bank of England’s rate rise, saying mortgage holders “all know what it means”.

Those on tracker mortgages, which follow the market, will see their repayments go up, while fixed rate payers will see no change, he said.

Rachel Reeves: Rate rise a ‘huge concern'

15:00 , Liam James

Shadow chancellor Rachel Reeves, reacting to the rate rise, said: “This will be a cause of huge concern for many. Families are already dealing with a Tory mortgage penalty and soaring food prices.

“Labour will bring the sound economic management urgently needed to stabilise the economy.”

Mortgage rates are at a six-month low from their peak in the weeks after September’s “mini-Budget”, according to MoneyFacts.com, though lenders will be considering their next step after today’s rate rise.

‘Storm clouds building’ for mortgage holders

14:30 , Liam James

Households worried about debt are being urged to seek help, as the Bank of England’s interest rates rise pushes mortgage repayments higher.

Joanna Elson CBE, chief executive of the Money Advice Trust, the charity that runs National Debtline and Business Debtline, said: “Storm clouds are building for many households with today’s rise in interest rates coming a day after inflation was shown to have risen again in February.

“For homeowners already struggling, further increases in mortgage costs will be a major concern, especially for those on variable rates or coming to the end of their contracts.”

She said renters would also feel the squeeze as landlords pass rates on to tenants.

“I would encourage anyone worried about their mortgage repayments to contact their lender as soon as possible. You can also contact a free debt advice service like National Debtline or Business Debtline,” she said.

Bank had ‘tricky’ call to make, says CBI chief

14:05 , Liam James

Anna Leach, deputy chief economist at the CBI business group, said the Bank of England’s decision to raise rates was a “tricky one for the MPC”.

She said it took place “against the backdrop of recent global financial market turbulence, a surprise rise in domestic inflation and a Budget which provided more support for the economy”.

She added: “The MPC will also have an eye to the recent turmoil in the banking sector.

“While financial stability is the remit of the FPC, an excessive tightening in credit conditions for businesses and households arising from financial market turbulence could cause the MPC to reconsider the level of interest rates in future months.”

FTSE stays down after rates rise

13:45 , Liam James

The FTSE 100 remained low after the interest rates decision, after falling 66 points ahead of the decision.

Banks were among the worst performers as London’s top index sat 0.8 per cent lower at around 7,506 points following the decision.

Hunt backs Bank

13:20 , Liam James

Following the latest interest rate increase by the Bank of England, Chancellor Jeremy Hunt said: “With rising prices strangling growth and eroding family budgets, the sooner we grip inflation the better for everyone.

“That’s why we support the Bank of England’s actions today and why we will continue to play our part in this fight by being responsible with the public finances, alongside providing cost-of-living support worth an average of £3,300 per household over this year and next.”

The Bank said the chancellor’s Budget last week influenced the lower-than-expected 0.25 per cent rise, particularly the extension of the Energy Price Guarantee.

Pound jumps after rate rise

13:00 , Liam James

The pound has moved higher after the Bank of England’s interest rates rise.

Sterling was already around 0.3 per cent higher against the dollar before the announcement, but made further gains to sit 0.5 per cent at 1.232 after the increase was confirmed.

The pound was also higher against the euro, increasing by 0.25 per cent to 1.132.

Bank moves despite falling inflation forecast

12:27 , Liam James

The Bank of England’s rate rise may come as a shock to those following forecasts of falling inflation.

In a statement, the Bank said the 0.25 per cent rise was an exercise in restraint, keeping high inflation in mind but looking ahead to the expected dip.

“This lower-than-expected rate is largely due to the near-term news in the Budget including on the EPG, alongside the falls in wholesale energy prices.

“Services CPI inflation is expected to remain broadly unchanged in the near term, but wage growth is likely to fall back somewhat more quickly than projected in the February Report,” the Bank said.

Interest rate rise ‘risks full-blown recession'

12:14 , Liam James

The Bank of England risks pushing Britain into “full-blown recession” with the interest rates rise, according to an economic expert.

Joe Nellis, Professor of Global Economy at Cranfield School of Management, reacting the Bank of England’s interest rate decision said: “The Bank of England’s decision to increase interest rates to 4.25 per cent could push the economy into a full-blown recession.

“A growth recession was inevitable prior to the rise, but the vote by the MPC will only delay any prospects for an economic recovery.Why has the Monetary Policy Committee voted to make matters worse?

“Households are already facing the biggest fall in their living standards for many decades, and the banking sector is under strain. Further interest rate rises will do more harm than good at this stage.”

Bank of England hikes interest rates

12:09 , Liam James

The Bank of England has raised interest rates to 4.25 per cent from 4 per cent.

They took the decision after official figures earlier this week showed a surprise increase in Consumer Prices Index (CPI) inflation in February and as they judged that the UK’s gross domestic product (GDP) was likely to perform stronger than previously thought.

Two members, Swati Dhingra and Silvana Tenreyro, voted against the rise, arguing that some of the recent increases to the base rate have not yet filtered through into the real economy.

Seven members of the Bank of England’s Monetary Policy Committee (MPC) voted to increase the base interest rate from 4 per cent to 4.25 per cent.

Norway raises interest rates

11:29 , Liam James

The Bank of England looks set to be the third central bank to raise interest rates today after Norway approved a 0.25 per cent hike.

Norges Bank set its key interest rate at 3 per cent and forecast a further 0.5 per cent rise by summer after a weaker-than-expected krone outweighed fears of a banking crisis.

Credit Suisse deal ‘halted banking crisis'

11:08 , Liam James

The Swiss central bank has hiked its key interest rate and insisted a government-orchestrated takeover of troubled Credit Suisse by rival bank UBS ended the financial turmoil.

In a statement, the Swiss National Bank (SNB) said it is providing large amounts of support for the deal to merge Switzerland’s biggest banks and that the late Sunday announcement by the federal government, financial regulators and the central bank “put a halt to the crisis”.

“An insolvency of Credit Suisse would have had severe consequences for national and international financial stability and for the Swiss economy,” said Thomas Jordan, chair of the Swiss central bank’s governing board. “Taking this risk would have been irresponsible.”

The Swiss central bank hiked its key interest rate by half a percentage point to counter inflation that has risen since the beginning of the year to 3.4 per cent last month.

Bank rates decision in shadow of Fed

10:04 , Liam James

The Bank of England will look to the United States in making a decision on whether to raise interest rates.

Washington’s Federal Reserve yesterday voted to increase the base rate by 0.25 percentage points, up to a 16-year high range of 4.75 per cent to 5 per cent.

The increase was smaller than had been expected before the banking crisis of recent weeks, which has been blamed in part on higher rates encouraging businesses to draw out their savings rather than relying on more expensive borrowing.

City chiefs join forces in plan for future of UK finance amid global banking troubles

08:56 , Joe Middleton

Leaders from financial service giants will join forces in a plan to secure the future of UK finance sector.

It comes as the nation awaits the Bank of England’s latest interest rate decision which is expected to rise for the 11th time in a row following yesterday’s shock rise in inflation and weeks of banking troubles.

The plan, involving Lloyd’s, JP Morgan and Barclays, among others, will identify areas of risk in the UK finance sector as well as secure innovation for sustainable finance, the City of London Corporation confirmed.

Katharine Braddick, Group Head of Strategic Policy, Barclays, said: “Recent geopolitical shocks and the shared challenge of climate change remind us that the world’s economies are interconnected. The UK can play a leading role here, in setting international standards.”

BoE raising rates today will cause ‘more damage’, says mortgage expert

08:42 , Joe Middleton

Stuart Gregory, managing director of Lentune Mortgage Consultancy, has tweeted that the BoE raising rates today will cause “more damage”.

He said: Real truth is that Bank of England raising interest rates tomorrow will cause more damage.

“Millions of borrowers are looking at double or triple their current mortgage outgoings this year as their low rates end. No-one wins - as Landlords will need to pass this on as well.”

Investec Economics predicts BoE will opt for ‘wait-and-see approach'

08:25 , Joe Middleton

Investec Economics predicts the BoE will opt for a “wait-and-see approach” and keep rates at 4% while it assesses the situation.

Economist Ellie Henderson said: “The MPC will have to assess which is the lesser of two evils: the risk of inflation being higher for longer or the current threat to financial stability stemming from the rapidly evolving fears of a banking crisis.”

Bank may have to act on interest rates as inflation kicks the poorest hardest

08:14 , Joe Middleton

With food prices surging at 18 per cent, the MPC simply can’t afford not to act, writes James Moore.

Bank may have to act on interest rates as inflation kicks the poorest hardest

Bank of England is expected to increase interest rates for 11th time in a row

08:10 , Joe Middleton

The Bank of England is expected to increase interest rates for the 11th time in a row today after an unexpected resurgence in UK inflation.

Economists are pencilling in a rise to 4.25% from 4%, with the case for an increase strengthened by official figures on Wednesday revealing a surprise jump in inflation to 10.4% last month.

The noon decision also comes after the US Federal Reserve raised its key overnight interest rate by a quarter of a percentage point, despite recent turbulence in financial markets amid fears of a banking crisis.

But the Bank of England faces a difficult balancing act, weighing up the need to rein in inflation with the worries over banking woes and the possibility they may start to clamp down on lending.