A warning has been issued to homeowners as mortgage rates could spike again today.
The Bank of England is expected to unveil the biggest interest rate rise since the 1980s on Thursday as it tries to control surging inflation rates. A meeting will be held by the nine members of the Monetary Policy Committee, who will make a decision that could push up the amount that millions of mortgage holders have to pay their banks every month.
Mortgages are decided against the interest rate and analysts expect the Bank will push up the interest rate from 2.25% to 3%, which would be the biggest single increase since 1989. Less than a year ago the rate was 0.1% - and this would be the eighth time in a row the Bank hiked interest rates.
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Earlier this month, markets had predicted the interest rate increase could be as much as one percentage point. The markets calmed somewhat after the change of Chancellor and Prime Minister and Bank of England bond purchases pushed down on the cost of borrowing.
However, last month Bank of England Governor Andrew Bailey warned it was likely the hike in interest rates could be bigger than the 0.5 percentage point increase to 2.25% seen at the previous meeting.
He said on October 15: "As things stand today, my best guess is that inflationary pressures will require a stronger response than we perhaps thought in August." Analysts at Deutsche Bank have said they expect the Bank of England to opt for a 0.75 percentage point rise with a split vote.
Experts at the firm said they expect latest forecasts from the Bank of England, which will also be revealed on Thursday, to show that "the economic outlook has deteriorated further". They added: "Conditioned on market pricing, the UK economy will likely fall into a deeper and more prolonged recession."
The Bank will also confirm its inflation expectations for the longer term, which are due to show that the cost of living will be much higher than the central bank's 2% target next year. James Smith, developed markets analyst at ING, issued a downbeat prediction for the Bank's latest economic outlook.
He 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."
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