Bank of England deputy governor suggests further interest rate hikes are likely

Nov 05, 2017, 01:57
Bank of England deputy governor suggests further interest rate hikes are likely

In September, consumer prices rose 3%, the highest level since March 2012 and above the central bank's target rate of 2%.

"The decision to leave the European Union is having a noticeable impact on the economic outlook", Bank of England said in a summary.

TSB announced a smaller increase, of 0.15 percentage points - although its variable rate mortgages will rise by 0.25 percentage points from next month.

The Bank of England uses interest rates to try and control inflation, which is now at three per cent and way above any pay increase most working people have seen in a while.

"The increase has no bearing on those borrowers who have fixed rate mortgages, which accounts for the vast majority of customers we have lent to in the last five years since re-entering the market".

Speaking on the BBC's Today Programme Broadbent said: "We have said that given all the other things we assume in our forecast, many of which will be misses - there's always unknown things and unpredictable things happening - but given our outlook now, we anticipate we'll need maybe a couple more rate rises to get inflation back on track while at the same time supporting the economy".

"No further decisions have been confirmed yet regarding our other savings accounts and mortgage products".

"The 0.25% lift in the base rate will likely be passed on to borrowers on variable-rate mortgage deals nearly immediately-with a material effect", said Simon Gammon, managing partner at Knight Frank Finance.

"For a whole generation of United Kingdom households now entering adulthood, it's a small but important reminder that interest rates can move in an upward direction, even if only slowly", Aberdeen Standard Investments economist Lucy O'Carroll commented. My concern is the impact a rise in interest rates will have on those who are just about managing.

Not all home owners have variable mortgages, and interest payments on debt are "lower than they've ever been relative to income", he said.

Ben Broadbent told the BBC that the rate rise announced on Thursday was "moderate", and that interest payments on debt were still at record lows.

However, they appear more willing to pass the rate rise on to borrowers.

Mark Carney, the Bank of England governor, said he expected all providers to increase returns for savers.

He added that savers were expected to benefit from the rate rise.

"We'll watch it closely".