Interest rates rise THIS WEEK with base rate to hit 15 year high in huge blow for mortgage holders

The Bank of England is expected to rise interest rates on Thursday.
The Bank of England is expected to rise interest rates on Thursday.
House of Commons
George McMillan

By George McMillan


Published: 30/01/2023

- 10:30

Experts have warned that the UK will enter a 'virtually unavoidable' recession later this year

Interest rates are set to rise this week and base rates are set to hit a 15 year high in a huge blow to mortgage holders.

The Bank of England is expected to increase interest rates again later this week, with experts claiming this will be the last of the frequent rises the UK has seen in recent months.


Markets think interest rates will be increased to four per cent on Thursday, 0.5 per cent higher than it is currently.

This is the highest base rate the UK has seen since the financial crisis in 2008.

The hiked base rates are expected to drop off in the months following, as the UK passes the peak of the cost of living crisis.

Economists have still warned that the UK is set to enter a recession, despite the “economic optimism”.

Societe Generale Global Economics said: “Even though the outlook is less gloomy than expected only three months ago, we still think a recession is likely and the MPC’s forecasts should continue to predict one for this year.

“This, and the mounting evidence of some cooling in the labour market, vacancies and job growth in particular, should lead the committee to contemplate an imminent end to tightening.”

The increases will put even more pressure on households, with an estimated 2.7 million owners on short-term fixed-rate mortgages having to pay an additional £100.

It comes as close to 50 per cent of working age households reported being either behind on or struggling with housing-related costs in November.

Some mortgage holders are yet to feel the impact of rising interest rates rising due to being on a fixed-rate deal, but they could see their costs increase when their current deal comes to an end.

File photo dated 05/10/15 of letting and estate agents signs outside flats on the Old Kent Road in London. A downward trend in house prices gained further momentum towards the end of 2022, according to surveyors. Issue date: Thursday January 19, 2023.
Economists have still warned that the UK is set to enter a recession, despite the “economic optimism”.
Anthony Devlin

Philip Shaw, chief economist at Investec said: “Recent weeks have ushered in a greater sense of economic optimism,

“This has been driven partly by the mild European winter, which has helped to avoid a need for energy rationing, contributing to a substantial fall in current spot gas prices as well as gas price futures.

“In the UK, we are set for another year where real household disposable incomes are set to fall by about three per cent, which will continue to squeeze spending and make a recession virtually unavoidable.”

Earlier this month Andrew Bailey said mortgage debt and home repossessions are much lower now than during previous financial crises.

He told the Treasury Committee: “Overall mortgage debt service levels are lower than they were than at points in history when we had stress – before the financial crisis and in the early nineties.

“However, I do recognise that one of the big distinctions between now and some of the points in the past is that we are in a cycle of rising interest rates.”

File photo dated 03/07/17 of a general view of housing in Scarborough, North Yorkshire. Around one million homes across the UK have now had all the gains in value made during the coronavirus pandemic wiped out in recent months, according to calculations by a property website. Issue date: Friday January 20, 2023.
Markets think interest rates will be increased to 4 per cent on Thursday, 0.5 per cent higher than it is currently.
Tim Goode

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