How High Will UK Interest Rates Rise?
The UK population is aware of the impact of inflation and the economic crisis, which has resulted in a sense of uncertainty. The Bank of England (BOE) has implemented various measures to mitigate the crisis; however, it appears that none have yielded favourable results. Consequently, the institution has revised its interest rates once more. The Bank of England's interest rates underwent a revision on June 22nd, 2023, resulting in a rate of 5%.
The bank has raised interest rates by 0.5%. In May 2023, the interest rate was recorded at 4.5%, marking the twelfth consecutive hike in interest rates since 2021. The Bank of England has implemented its 13th rate hike, resulting in an interest rate of 5%.
Several financial and economic analysts posit that there is a potential for a 6% increase by the conclusion of 2023, with a sustained plateau until June 2024. The current increase in interest rates is reminiscent of the ones observed in 2001. The increase in interest rates and inflation in the UK has had a significant impact on the real estate market and rental incomes.
What is the Magnitude of the Interest Rate Hike Noted up to June 2023?
The section covers the interest rates increased by the Bank of England up to June 2023. At present, the economy has witnessed a 5% increase, which may go up as the expert predicts. It is important to keep an eye on the ongoing economic shifts so that one can easily plan their investment in the UK.
Here, the data represents the interest rate hikes of the last six months. Besides, the UK Inflation rate has also been stated to give the readers a detailed account of what is happening in the UK economy and what measures have been taken so far.
Witnessing the data in the table, one can easily estimate that there might be one more round where the BOE can increase interest rates. Experts are predicting that it might go up by 6% as inflation is not yet controlled.
What Effect Do High Interest Rates Have on UK Residents?
The latest update on Thursday has resulted in additional adverse consequences for the 1.4 million people who possess residential mortgages with variable interest rates. Approximately 50% of the individuals have mortgages linked to the base rate or are availing of discounted rates, whereas the other 50% are subjected to the standard variable rate (SVR) of their respective lenders.
An individual with a tracker mortgage currently set at 5.5% will encounter a rise in their interest rate to 6%. These specific mortgage contracts have a direct correlation with the base rate. As a result, the monthly payments will increase by £43 for individuals with a £150,000 repayment mortgage and 20 years of remaining term. The monthly payments will increase from £1,032 to £1,075.
If inflation becomes a problem, the Bank of England is prepared to make additional adjustments by the end of the year. As a strategy to fight the hard economic environment, residents may see a straight 1% hike in interest rates. The current 5% interest rate will surely affect citizens' daily lives by imposing greater mortgage costs.