Interest rate hike expected today after UK inflation shock

The Bank of England is widely expected to increase interest rates again today after UK inflation remained much higher than expected for the fourth consecutive month.

Inflation, which measures the rate of rising prices, remained unchanged at 8.7% in May, fresh data shows.

The surprisingly high figure means interest rates are likely to rise by 0.25% to 4.75% today, but some analysts suggest they could now go up to 5%, leaving many homeowners facing big increases in mortgage payments.

Influential think tank the Institute for Fiscal Studies (IFS) warned higher rates would result in a drop of more than 20% in disposable income for 1.4 million mortgage holders.

Tom Wernham, economist at the IFS, said it will be a “serious shock” for families with the worst affected facing “eye-watering” increases in their bills.

He said: “Many families bought homes – often with sizable mortgages – when interest rates were very low. As people’s fixed term offers come to an end they are going to be exposed to much higher interest rates.

“For many, the increase in monthly repayments is going to come as a serious shock.

“Given the cost of living pressures people are already facing due to high food and energy price inflation, these significant increases in mortgage costs could not come at a worse time.”



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