The Bank of England is widely expected to increase interest rates today for the second consecutive month in an attempt to tackle strong inflationary pressures building up in the economy.
It is anticipated that rates will rise by 0.25% to 0.5%. If the expected rise goes ahead it would be the first time the Bank of England has increased interest rates in back-to-back months since June 2004.
Although the market is pricing in an interest rate rise to 0.5%, it is expecting rates to hit 1% by the summer and 1.25% by the end of 2022.
UK inflation soared to a 30-year high in the year to December thanks to rising energy costs, strong demand for goods and services, and ongoing supply chain disruption.
Henry Knight, managing director of Springtide Capital, said: “With the Bank of England having increased the interest rate twice within a short period of time already, it remains to be seen if another raise is likely to happen later this year. Some economists predict interest rate to reach up to 1.25% by next year, which, compared to the current rate of 0.5%, would have a much more significant effect on buyers. Until then, with the majority of homeowners being on fixed long-term mortgage rates, we don’t expect the latest increase to cause any major impact on the market.”
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