- Written by Michael Race
- BBC News business reporter
Investors are divided over whether interest rates will rise again on Thursday after data showed an unexpected slowdown in price increases.
A 15th consecutive increase from 5.25% to 5.5% had been widely expected, but only half of investors now expect a rise.
The forecast changed after it was revealed that the inflation rate, which is the rate of increase in prices, unexpectedly fell to 6.7% in the year to August.
The Bank of England, which determines interest rates, will reveal its decision at midday.
If interest rates rise, not only will interest rates on some mortgages and loans rise, but savings rates will also rise.
Inflation in the UK is much higher than normal, putting financial pressure on households, so the central bank is raising interest rates from December 2021.
By making it more expensive for people to borrow money, they hope households will save money and buy fewer things.
It is also possible that the pace of company price increases will slow.
But it’s a difficult balance to strike because raising interest rates too aggressively could lead to people cutting their household spending, leaving businesses struggling to survive and slowing economic growth.
The US central bank, the Federal Reserve, on Wednesday kept its policy interest rate unchanged at 5.25% to 5.5% as it assesses whether it is doing enough to combat inflation.
Investment bank Goldman Sachs said it expects British interest rates to remain unchanged on Thursday after showings that inflation is falling.
But other economists say further rate hikes could be considered as inflation remains at 6.7% – well above the Bank of England’s 2% target.
Rising interest rates affect different people in different ways.
Mortgage holders who have taken out variable or tracker mortgages, or who are looking to secure a new fixed rate deal, may find it more expensive to borrow money for their home. Sho.
The rise from 5.25% to 5.5% means someone with a typical tracker mortgage will pay around £26 more a month. According to UK Finance, those with SVR mortgages will face an increase of £14.50.
Even if there were no changes, compared to December 2021, people on tracker mortgages would still be paying £540 a month more, and on SVRs they would be paying £299 more a month.
However, the vast majority of mortgage holders, three-quarters of homeowners, are protected from current interest rate rises because they have fixed-rate contracts, but around 800,000 contracts remain in place until the end of this year. , and another 1.6 million are scheduled to close next year. .
Bank of England interest rates will also affect how much you charge on credit cards, bank loans and car loans.
Lenders may decide to increase prices if they expect interest rates to rise in the future.
However, those with savings should get a better return on their money.
For governments, higher interest rates have the knock-on effect of having to pay more interest on the national debt.
What happens if I miss my mortgage payments?
- If you fail to make a payment for more than 2 months, you will be officially in arrears.
- Lenders should treat you fairly by considering requests for changes to your payment method, such as lower repayments over a short period of time.
- You may be able to extend the term of your mortgage or pay only interest for a certain period of time.
- However, the arrangement will be reflected on your credit file and may affect your ability to borrow money in the future.