The Bank of England (BoE) is set to announce the results of its latest Base Rate review today.
It means there could be significant changes in rates all across the country, potentially affecting how much money people will pay back on loans, mortgages, and savings accounts. Currently, interest rates are at 4.25 per cent, the highest it's been since the 2008 financial crisis.
Over the past year, the BoE has been regularly increasing interest rates in an attempt to drive down inflation to meet its target of 2.5 per cent. However, there are fears among economists that interest rates could increase to 4.5 per cent.
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If the rate does increase again today, it will be the twelfth hike in a row.
Chief UK economist Andrew Goodwin said: “Ahead of the May meeting, the Monetary Policy Committee (MPC) can justifiably argue that the criteria for tightening monetary policy further, that it set out in the March policy statement, have been met: the labour market is still tight and wage growth and services inflation remain stubbornly high.”
In February, when the last report was produced, the Bank said it expects interest rates to fall sharply over the rest of the year. But with CPI remaining above double-digits since then, the latest report will be watched closely for signs this forecast has changed.
Ellie Henderson, from Investec Economics, said the “clock is ticking” on the Bank’s monetary policy tightening cycle, and an increase on Thursday could be the last. She said: “As things stand and considering the sharp downward influences on inflation in the coming months, namely from energy but also from cooling food and goods price inflation, we suspect that this could be the last hike by the Bank of England in this cycle.”
However, there is still a “high chance” the Bank will decide to lift rates by 0.25 percentage points again in June, especially if inflation remains stubbornly above target, she added. “What is clear is that the days of successive interest rate hikes in this economic cycle are limited, but the exact endpoint is clouded with uncertainties.”
What time is the announcement?
Today, the Bank will announce the new interest rate following a meeting which will presumably take place in the morning. Previous decisions have been announced from 12pm, therefore, we can expect the new interest rate to be announced anytime around midday.
What will happen to my money if interest rates go up?
Interest rates will have a direct effect on those with a loan or a mortgage with a variable interest rate. If the interest rate goes up, you may notice that the cost of your repayment will go up as well.
However, if you're on a fixed rate, you won't see any changes to your payments until the end of your fixed period. If you're concerned about how high your monthly payments could go up, you can use a mortgage calculator to better prepare yourself.
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