The Bank of England is set to raise interest rates to 4.5% on Thursday in a fresh bid to cool inflation, which remains stubbornly high at 10.1%.
Mortgage holders have been hit by a series of interest rate rises as the Bank of England attempts to bring spiralling price increases under control.
Interest rates are currently at 4.25%. They were expected to peak at 4.5% and fall back toward more normal levels next year. But after the Office for National Statistics said inflation in March remained in the double digits – defying economists’ forecasts it would dip to 9.8% – traders ramped up bets interest rates would increase to 5% by the autumn.
The shock figure has raised questions about Rishi Sunak’s pledge to halve inflation by the end of the year. The prime minister has made it one of his five key priorities for 2023 to bring inflation under control to “ease the cost of living and give people financial security”.
A succession of Bank of England rate rises since December 2021 means that fixed mortgage rates now average 5.28% for two-year deals and 5% for five-year deals, according to the latest figures from Moneyfacts.