Imminent rise in interest rates now expected
The Monetary Policy Committee (MPC) voted to hold interest rates at 0.5% for the next month.
But the panel of economic experts said rates will need to rise sooner than expected, and more sharply than previously thought, if the economy stays on its current trajectory.
In its Inflation Report today the Bank of England noted that, with a strengthening world economy and more people in work, the UK economy now needs a little less support. It said that if this continues, interest rates will need to be increased further.
Ian Kernohan, economist at Royal London Asset Management, said: “The latest Inflation Report significantly raises the risk of a rate hike in May. Assuming there is no major economic shock, the MPC has judged that monetary policy needs to be tightened somewhat earlier, and somewhat more, than anticipated in November.”
Despite the clear message to expect more rate rises, the Bank of England also said it expects any further rises in interest rates to happen at a gradual pace and to a limited extent. In its report it noted that ‘interest rates are likely to remain substantially lower than a decade ago’.
However, if you are concerned about your mortgage payments rising further and you are currently on a variable or tracker deal, moving to a fixed rate mortgage would allow you to protect yourself from rising rates.
Ishaan Malhi, CEO and founder of Trussle said: “We may not see another interest rate rise for a few months, but it’s looking like it won’t be long before mortgage rates begin to climb.
“For hopeful first-time buyers and existing homeowners looking to switch mortgage, using this window of time to lock in a low fixed rate deal could prove a wise move which could save thousands of pounds in the long term.”