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Home loan holders will see their annual costs rise by more than £400 after the Bank of England raised interest rates to 3%, Martin Lewis said. The money-saving specialist said tracker agreements would increase by around £40 a month (£480/year) for every £100,000 mortgage. Meanwhile, the pound fell after the Bank of England raised interest rates by 0.75 percentage points amid warnings of the biggest recession since records began. The Monetary Policy Committee (MPC) raised the key interest rate by 0.75 percentage points this afternoon to 3%, after warning last month that rising inflationary pressures would require a “stronger response” than previously thought. The decision pushed interest rates to the highest amount since 2008. It is the eighth consecutive time that the Bank has increased interest rates. Less than a year ago the rate was 0.1 percent.
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Home loan holders face hundreds of pounds more in costs after the Bank’s increase
The money-saving specialist said tracker agreements would increase by around £40 a month (£480/year) for every £100,000 mortgage. Matt Mathers November 3, 2022 2:15 p.m 1667483154
Citizens Advice responds to rising interest rates
Morgan Wild, Head of Policy at Citizens Advice, said: “Right now, people are facing a double whammy of high interest rates and high inflation. “Those running out of fixed rate mortgages could face increases of hundreds of pounds in their monthly payments. And people on variable rates will already see their costs go up. “This comes on top of other pressures like energy bills going through the roof and the grocery store not stretching as far. “At this critical time, banks need to show understanding to anyone struggling with repayments. People can be worried about asking for help, so it is essential that lenders reach out proactively to offer support.” Maryam Zakir-Hussain November 3, 2022 1:45 p.m 1667482554
In graphics: Britain’s interest rates since 2007
The Bank of England raised interest rates to 3% from 2.25%, marking the biggest single increase since 1989. The decision pushed the interest rate to its highest amount since 2008. This chart shows UK interest rate levels since 2007. This chart shows UK interest rate levels since 2007 (Press Association Images) Maryam Zakir-Hussain November 3, 2022 1:35 p.m 1667481979
Interest rates are a ‘blunt tool’ to control inflation – British Chambers of Commerce
David Bharier, head of research at the British Chambers of Commerce, said interest rates were a “blunt tool” to control inflation. “The Bank has set a clear indicator that it intends to reduce inflation by putting further pressure on consumer demand,” he said. “But a rate hike is a very blunt tool to control inflation that is largely the result of global factors, including rising energy costs and supply chain disruption. “This is yet more bad news for businesses caught between rising raw material, energy and borrowing costs and weakening consumer demand.” He warned that companies would be “extremely worried about what the future holds”, with the prospect of spending cuts and tax rises signaled by Jeremy Hunt and Rishi Sunak. Maryam Zakir-Hussain3 November 2022 13:26 1667481354
Janet Mui, head of market analysis at RBC Brewin Dolphin Wealth Management comments on the rate
“Economic conditions are becoming restrictive and what matters is how quickly and by how much interest rates will rise from here. The bad news is that interest rates are expected to continue rising until the 4th quarter of 2023, which will put further pressure on those with variable rate mortgages,” said Janet Mui. “The Bank of England does not have details of the government’s fiscal plan (and the subsequent market reaction on November 17), so it may struggle to make accurate economic forecasts. “The good news is that the restoration of calm in UK markets means the BoE faces less pressure to hike aggressively. UK interest rates are expected to peak at 4.75% at the end of 2023, much softer than the above 6.25% set after the mini-budget. “The decline in benchmark natural gas prices in Europe, support for energy bills and potential austerity point to a lower inflation trajectory than previously forecast. “The UK is highly sensitive to interest rate changes and with the economy likely to be heading into recession, we believe the BoE will be cautious about making increasingly bold statements about future rate rises than are currently being priced in by financial markets ». Maryam Zakir-Hussain November 3, 2022 1:15 p.m 1667480854
Interest rates: Sunak accused of locking UK in ‘vicious cycle of stagnation’
As Chancellor Jeremy Hunt delivered a further signal of austerity measures to come in this month’s Autumn Statement, there were warnings from business not to repeat the mistakes of the early 2010s by cutting government investment. And the TUC renewed its call for a snap general election to allow voters to judge the package of tax rises and spending cuts planned by Mr Hunt in his November 17 statement. More than 460,000 have signed an Independent petition for a snap election. Our political editor Andrew Woodcock has more: Maryam Zakir-Hussain3 November 2022 13:07 1667480350
Bank of England governor says ‘no easy outcomes’ as mortgage holders face huge challenges
Asked about the challenges facing mortgage holders with rising interest rates amid rising energy bills, Andrew Bailey admitted there were “no easy outcomes”. “We understand the difficulty mortgage holders face. “If we don’t take steps to reduce inflation, it will get worse. There is no easy outcome to this. “My central view is that what we’ve announced today in terms of the rate move and the message we’ve given very clearly to the market curve, this action should not lead to higher mortgage rates. In fact, there is a downside to mortgage interest rates in respect of new fixed rate mortgages’. Maryam Zakir-Hussain3 November 2022 12:59 1667479662
GDP ‘weaker than expected’ to fall in 2024, warns Andrew Bailey
Commenting on GDP, Bank of England Governor Andrew Bailey said: “GDP was weaker than we expected, labor market data was stronger and inflation numbers while high came in as expected in August. “There are some signs that the demands for work are starting to ease. “The number of unemployed has fallen below pre-coronavirus levels, but a key reason why the labor market has tightened since the pandemic is a marked increase in the number of people without work who are not actively looking for work. “Unfortunately, many people outside the labor market report having a long-term illness.” GDP will continue to fall in 2024, Governor Bailey warned: “In the committee’s best collective judgment GDP will continue to fall through 2023 and 2024. Compared to previous UK recessions, GDP remains weak relative to with the pre-recession level for an extended period. Maryam Zakir-Hussain November 3, 2022 12:47 p.m 1667479554
The Congress of Trade Unions reacts to the increase in interest rates
Reacting to the interest rate news, TUC finance chief Kate Bell warned of a “bleak recession” to come. “Working people are paying a high price for the Tories crashing the economy,” he said. “Today’s rise in interest rates will increase the risk of a bleak recession this winter and will hit businesses and people paying mortgages. “We need a new economic plan with rising wages and strong public services at its heart. “And we need a general election now, to replace the party that created this crisis.” Maryam Zakir-Hussain November 3, 2022 12:45 p.m 1667479224
Labour’s shadow chancellor says the Tories have ‘trapped’ the country in a vicious cycle
Labour’s shadow chancellor Rachel Reeves said: “Families are now facing higher mortgages and more stress after months of financial chaos. “Today’s recession warning reveals how 12 years of Tory rule have weakened the foundations of our economy and left us exposed to shocks, from crisis to crisis with falling living standards and low growth. “As chancellor and now prime minister, Sunak must face up to his mistakes that led to the vicious cycle of stagnation this Tory government has trapped us in. “Workers are paying the price for the Tories’ failure. Britain deserves more than this. “Labour will provide the financial responsibility we need and deliver a sound plan for growth across our country, investing in jobs in renewable energy, nuclear power and home insulation. Setting business rates; and promoting a modern industrial strategy’. Maryam Zakir-Hussain3 November 2022 12:40
