Christmas mortgage misery as BoE poised to hike interest rates today – wiping out Labour's cost of living help – despite oil price tumbling after Trump midterms meltdown
Families are facing Christmas mortgage misery with the Bank of England poised to increase interest rates today.
The Monetary Policy Committee is regarded as nailed on to hike the base rate by 0.25 percentage points at noon, to 4 per cent.
For many homeowners the move will effectively wipe out the cost of living help announced by Labour in the Budget last week. Those on typical tracker mortgages could see monthly payments rise £31, and variable deals could go up around £14.
The increase is still anticipated despite markets betting that the US midterms battering for Donald Trump could ease the Middle East crisis. That has been the biggest factor driving up inflation, but Brent Crude has tumbled to around $95 from $115 before the elections.
A rates rise this lunchtime would be the first since August 2023.
For many homeowners the move will effectively wipe out the cost of living help announced by Labour in the Budget last week
Pressure on the MPC to take action has grown since official figures showed headline CPI inflation rate rose to 3.5 per cent in September, an 11-month high. The Bank’s target is 2 per cent.
Inflation is expected to gather pace this winter after Ofgem’s energy price cap rose by 3.6 per cent for a typical household on October 1. It had been set to jump again by 22 per cent in January.
Ellie Henderson, an analyst for Investec, said: ‘We imagine that many committee members’ patience with the recent rise in inflation has worn thin.
‘The longer energy prices remain elevated, the greater the risk that a temporary price shock becomes more permanent; a ‘risk management’ hike could guard against this.’
She cautioned that producers might ‘not be willing or able to shoulder the burden of higher energy prices for much longer’ and that this could push up prices in shops.
Alexander Harvey, UK economist for Oxford Economics, said a November rate hike looks to be a ‘done deal’ for the committee, which will be responding to higher oil and gas prices.
‘So far, two factors have been central to the MPC’s decision-making since the outbreak of the conflict in the Middle East: the scale and duration of the energy price shock, plus the extent of any second-round inflation effects from elevated energy prices,’ he said.
‘These factors will continue to dominate the outlook for Bank rate.’
He said the key thing economists will be looking out for is any signal from the Bank as to where interest rates could go from here, with the financial markets expecting further hikes into 2027.
Other central banks have already increased their interest rates, including the US Federal Reserve which did so last month for the first time in three years.
The MPC will also take into account other economic indicators including that the UK’s unemployment rate fell to the lowest level in more than a year in the three months to August, to 4.7 per cent.
The economy unexpectedly grew in August, by 0.1 per cent, suggesting resilience in the UK despite pressure on consumer spending and wider volatility because of the Iran war.