Hundreds of thousands of British households will see their disposable earnings squeezed yet further if the Bank of England raises rates of interest, as markets expect.
A slew of strong economic data in the past few weeks, together with a stark warning from the Workplace for Budget Responsibility (OBR) last week that consumer price inflation is more likely to average four per cent next 12 months, is piling strain on the Financial Coverage Committee to hike the bottom price from its historic low of 0.1 per cent.
Were it to do this, banks and building societies are more likely to increase charges in keeping with the uplift, welcome news for savers however depressing for owners on variable mortgage charges.
An increase in rates of interest is more likely to damage most those stuck on their lender’s customary variable price – at present estimated to be round one in 4 throughout the UK – with many of those owners unable to remortgage to a extra aggressive deal attributable to a adverse change of their monetary circumstances.
These are the identical folks already struggling sharply rising energy payments, costlier food because of world provide chain issues, and rising taxes from April next 12 months.
Added to excessive inflation and no guarantee of a pay rise, Britain’s most financially stretched are already set to really feel significantly poorer.
Thomas Pugh, economist at RSM UK, mentioned: “The Monetary Policy Committee is now placing extra weight on the dangers from rising inflation than from the slowdown in financial development and has strongly hinted that rates of interest will rise within the coming months.
Markets are pricing in an interest rate rise this week, already pushing up longer-term rates of interest and prompting mortgage lenders to drag their most cost-effective offers.
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