Bank of England expected to raise rates to 4% as inflation climbs
The Bank of England is widely expected to raise its key rate from 3.75% to 4% on Thursday, its first increase since August 2023. UK inflation reached 3.5% in September, driven partly by higher fuel prices, and the energy price cap is forecast to rise by a further 22% in January, according to the articles.
Bottom line — Markets are pricing in further increases, while the Bank’s guidance on what comes next will be closely watched.
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The BBC says a quarter-point rise would add £31 (€36) a month to repayments for a typical tracker mortgage.
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According to the BBC, the same increase would typically add £14 (€16) a month for borrowers on variable-rate deals.
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Moneyfacts puts the average new mortgage rate at 5.89%, the highest in three years, according to Today’s Conveyancer.
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An FT survey of 12 economists forecast inflation peaking at an average of 4.4% in the first quarter of next year.
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The FT says the Office for Budget Responsibility forecast a lower inflation peak of 3.8%, using energy-market prices from mid-August.
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City AM reports that economists and traders differ on the likely pace of later increases; traders are pricing in four quarter-point rises by the end of next year.