It’s bad news for mortgage holders and borrowers as the Bank of England (BoE) raises interest rates by a quarter point to 4% for the first time since August 2023.
As the war in the Straits of Hormuz continues, the rising costs of energy heavily influenced the members of the Bank’s Monetary Policy Committee (MPC). Eight members backed the quarter-point rise, while the ninth pushed for a full half per cent rise.
The BoE governor Andrew Bailey said, “Today’s increase shouldn’t be seen as the first in an inevitable long sequence of hikes… But unless the conflict in the Middle East is resolved, neither does it seem to be the last increase.”
The Bank warned that it expected inflation to hit 5% in the second quarter of 2027 and economists expect another increase early next year.
While the price of oil has fallen since the BoE’s inflation calculations and there is optimism of a resolution to the conflict as the US Democratic Party swept to power in both Houses of Congress, the BoE warned that there were considerable inflationary pressures already building in the business pipelines.
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