Experts are forecasting “more misery” for homeowners as the Bank of England is set to raise interest rates once again.
In the past year, mortgage repayments have risen substantially due to a wave of constant base rate hikes from the central bank.
These have been carried out by the Bank to mitigate the damage caused by inflation on the economy.
While the Consumer Price Index (CPI) rate remains high in the UK, last month it eased to 7.9 percent.
This has not stopped analysts from betting on further intervention from the financial institution with some estimating an increase from the current base rate level of five percent to 5.5 percent.
Nigel Green, the CEO of De Vere Group, is one of many who is predicting this outcome next month.
He explained: “Despite the data showing that the battle against inflation in the UK is being won, we expect the Bank of England will confirm it’ll continue with its aggressive interest rate hiking agenda at the monetary policy meeting on August 1.
“Although the consumer price index fell to 7.9% last month, amid lower petrol prices and a slowdown in the pace of growth for food, beverages and other basics, the central bank officials will likely argue that there is still work to be done.
“We believe the Bank will insist that although inflation is certainly coming down, it is doing so very, very gradually. It remains sticky – still the highest in the G7 – and a long way from the two percent target.
“They will say prices are still far too high and rising at a quicker pace than they have done in the past. In addition, they are likely to cite strong wage growth in the three months to May.”
Outside of the Bank of England, other central banks including the US Federal Reserve have opted to hike interest rates.
When rates are increased, the cost of borrowing for a country also goes up which leads to more expensive mortgages.
Homeowners on a variable rate mortgage are more likely to face higher repayment costs than those on a fixed rate.
Those who are in debt also see their monthly repayments shoot upm as a result of this decision.
One of the many knock-on effects of this is that consumers have less disposable income to spend.
As a result, the wider economy outside of housing is impacted in the wake of constant interest rate rises.
Mr Green added: “We believe that although the battle to tame inflation seems to be being won, with the lowest reading in 16 months, the Bank of England is highly unlikely to be dissuaded from its course of rate hiking action for the time being.”
