The base interest rate set by the Bank of England could reach six percent this year if inflation remains persistently high, an analyst has told Express.co.uk.
The central bank has consistently hiked the base rate since December 2021 as inflation continued to surge last year and remains high at 8.7 percent, for the year to April 2023.
The base rate is currently at 4.5 percent with many experts predicting it will go up again next week.
Giles Coghlan, chief market analyst for HYCM, said: “The next inflation print is due the day before the monetary policy committee [of the Bank of England] meet.
“This will be a crucial release that will not only set the tone for this month’s decision, but also the direction of interest rates for the rest of the year.
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“If this month’s inflation print – and particularly the core reading – comes in hotter than predicted again, expectations of further rates could push even higher toward the six percent mark.”
He said many analysts are predicting that the base rate could increase by 0.25 percentage points next week, rising to 4.75 percent.
Mr Coghlan said: “Wage data due tomorrow (June 13) will also be key – if weekly earnings have increased, it would be difficult to see the BoE doing anything other than hiking the base rate next week.
“Essentially, this is why mortgage deals are being pulled as providers anticipate the possibility of increased borrowing costs, reduced affordability for borrowers, and a riskier economic environment.”
Many banks and building societies have acted to pass on the base rate increases to their savers.
Providers have hiked their rates on a range of accounts, including on fixed rate accounts and ISAs.
With the increased rates, savers may want to look if they can get a better rate with another provider.
Sarah Coles, head of personal finance at Hargreaves Lansdown, said previously: “You could wait for rates to peak before doing this, but if your money is in an unrewarding high street account in the interim, you risk missing out on significant interest in the interim.”
But another rates hike would mean more heartache for mortgage holders on variable rates, as their monthly repayments will likely increase as a result.
Those on a fixed rate deal who are set to remortgage in the coming months may also see their repayments suddenly vastly increase.
Research from Equifax found more than 367,000 fixed-rate mortgages are due to come to the end of their five-year deals over the next year.
Most of these mortgage holders have an outstanding balance of more than £170,000 to clear.
The average person in this situation looking to remortgage may see their repayments increase by around £300.
Paul Heywood, chief data and analytics officer at Equifax UK, said: “There is a risk that some consumers could become mortgage prisoners with the current state of rates. Amongst these consumers, we expect to see a gradual increase in missed payments.
“Diminishing affordability levels may also restrict or even stall growth in house prices, perhaps leading to a correction in the housing market.
“The starting point for lenders and credit providers is to understand which of their customers are most likely to be impacted by rising mortgage rates, what the extent of that rise is likely to be, and the likely timing of that impact.
“Through Open Banking analysis, we can support lenders to anticipate such changes and act accordingly in the face of the looming mortgage shock, by analysing customer affordability, amongst other factors.
“We can also help limit lending to over-indebted consumers and provide support on how to roll this out.”
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