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The move will add more pressure to households in the UK as prices begin to rise. However, it will give savers a minor boost to their savings. City economists have predicted that the UK’s central bank will increase its official interest rate from 0.25 percent to 0.5 percent on February 3.<\/p>\n
The Bank of England became the first big central bank to raise rates during the pandemic.<\/p>\n
In December, the Bank of England’s monetary policy committee voted 8-1 to raise interest rates from 0.1 percent to 0.25 percent.<\/p>\n
Many investors expect interest rates to end 2022 as high as 1.5 percent.<\/p>\n
The forecast rates rise will directly affect about 2.2 million mortgage borrowers in the UK.<\/p>\n
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These mortgage borrowers have loans that are linked to the base rate.<\/p>\n
It is usual for commercial banks and building societies to pass on the interest rate rises in full to mortgage borrowers.<\/p>\n
Millions of homeowners prefer fixed rate deals rather than variable home loan rates.<\/p>\n
The interest rate rise will give savers, who have endured historically low interest rates, a long-awaited benefit to keeping their cash in savings accounts.<\/p>\n
DON’T MISS: <\/strong> However, the interest rate is still far below the current inflation rate which is above 5 percent, so savings will still be depreciating month on month throughout the year.<\/p>\n Rising food prices because of supply chain issues have been one factor in inflation rising to its highest level for almost 30 years in December.<\/p>\n The headline annual rate of consumer price index inflation reached 5.4 percent in December, up from 5.1 percent in November.<\/p>\n The Bank of England has forecast that inflation will peak at a high of 6 percent in April.<\/p>\n However, some economists fear that the rate of price rises could exceed 7 per cent.<\/p>\n The Federal Reserve chairman Jerome Powell at a press conference this week said the US central bank would not make an announcement on interest rates yet.<\/p>\n He said: “I would say the committee is of a mind to raise the federal funds rate at the March meeting assuming that conditions are appropriate for doing so.<\/p>\n “The economy no longer needs sustained monetary policy support.”<\/p>\n
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