Bank of England HOLDS interest rates at 3.75% – but borrowers brace for more mortgage misery this summer
The Bank of England held interest rates Although today it is at 3.75 percent inflation The shock of the Iran war.
In a eagerly anticipated announcement, the central bank left interest rates unchanged as it grapples with the effects of conflict in the Middle East.
However, it is feared that the Bank will be forced to raise interest rates to control inflation later this year as the closure of the Strait of Hormuz increases oil and gas prices.
This will mean misery for millions of households and businesses by increasing the costs of mortgages and other loans.
Bank of England keeps interest rates at 3.75% despite inflation shock
The oil price reached $126 per barrel Thursday morning; This is the highest level since Russia invaded Ukraine four years ago.
That figure eclipsed the previous high of $119.50 per barrel in the conflict in Iran, seen in early March, and raised fears of a significant jump in inflation.
Central banks often raise interest rates to reduce inflation and lower them once prices are back under control.
Before war broke out in the Middle East, the Bank expected inflation to return to its 2 percent target later this year, potentially paving the way for interest rate cuts.
However, there are now fears that inflation could reach 4 percent or even 5 percent by the end of this year, forcing the Bank to raise interest rates.
However, this could push the economy into recession by increasing the cost of borrowing.
Mortgage rates There has already been a sharp rise since the start of the war, as financial markets bet the Bank would raise interest rates later this year.
Nick Leeming, chairman of estate agents Jackson-Stops, said: ‘The Bank of England’s decision to keep interest rates steady provides a welcome sense of stability for the housing market and offers reassurance after a period of steadily rising borrowing costs following an inflationary shock.
‘This is not a comfortable pause. The bank continues to drift in two directions; inflation is becoming unstable, and growth and household demand are showing signs of softening. This balance makes policymakers cautious about signaling any policy easing anytime soon.
‘For the housing market, this means that borrowing conditions will remain high for longer than most expected at the beginning of this year. ‘While mortgage pricing has already adjusted to a more stable interest rate environment, prospects for meaningful relief in borrowing costs in the short term are likely to remain limited.’
Professor Joe Nellis, economic adviser at accountancy firm MHA, said: ‘With expectations for rate cuts falling sharply this year, households face prolonged hardship as borrowing costs remain high for longer. Already cautious businesses are likely to retreat further as financing remains expensive and demand is uncertain.
‘The long-term picture for the UK economy remains uncertain, but it is becoming increasingly clear that weak growth combined with rising inflation pressures will be a defining feature.’
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