Bank of England still expected to raise interest rates despite cooling inflation

19th July 2023
Home > News > Bank of England still expected to raise interest rates despite cooling inflation

Reported by MARC DA SILVA Property Industry Eye

The Bank of England will raise interest rates again next month despite UK inflation cooling, analysts predict

UK inflation fell further than expected in June to 7.9%, easing forecasts for how aggressively the Bank of England will raise interest rates over the next few months. The Office for National Statistics said the annual inflation rate as measured by the consumer prices index resumed a downward path after unexpectedly sticking at 8.7% in May. The drop exceeded City forecasts for a decline to 8.2%.

With inflation finally falling by more than expected, economists are scaling down their expectations of immediate interest rate rises – although they still think more will take place.

Nathan Emerson, CEO of Propertymark, commented: “As core inflation remains sticky, it is increasingly likely that the Bank of England will consider further interest rate rises. This has obvious impacts on mortgage holders, new and old.

“However, we are seeing a good amount of resilience in the market and serious buyers will continue to make a gain on the price achieved whilst sellers find a happy medium when negotiating the final agreed sale price.”

Financial markets responded by betting that the Bank of England would no longer drive interest rates above 6% early next year, raising hopes for some modest relief for mortgage holders amid the sharpest rise in borrowing costs for decades.

However, despite dropping to the lowest rate since March 2022, UK inflation remains the highest among the G7 group of advanced economies.

Highlighting the risk that Rishi Sunak could still miss his target to halve inflation in 2023 despite the improvement in June, the International Monetary Fund said the UK’s headline rate was on track to hit 5.25% by the end of this year.

Share this article
  • icon
  • icon

Related News Articles

‘Borrowers may well breathe a sigh of relief’ as fixed mortgage rates fall

Mortgage interest rates have continued to fall since the Bank of England increased the base rate earlier this month. Mortgage lenders have been reducing rates on their mortgage products in recent weeks after pricing in larger base rate hikes following former prime minister Liz Truss’ unfunded tax cut announcements. Fresh data provided by Moneyfacts reveals that the aver...

New How to Rent Guide published by government

An updated How to Rent Guide, a checklist for renting in England which must be issued by both letting agents and landlords to new tenants or those renewing, has been released by the government. It is crucial that agents issue the correct and current version of the How to Rent guide as a failure to do so before the tenants move in can invalidate a Section 21 notice used to regai...

Interest rates rise to 5%: here’s what it could mean for mortgages

The Bank of England (BoE) has announced an increase of 0.5% to its Base Rate this month. This is the 13th consecutive rise, and has pushed interest rates to 5%, which is the highest they’ve been for 15 years. The Bank keeps raising interest rates to tackle high levels of inflation. It was announced that the inflation rate has remained at 8.7% in the month to Ma...

Falls in UK mortgage costs predicted amid return of ultra-low interest rates

Banks and building societies look set to cut the costs of UK fixed-rate mortgages in the short- to medium-term after the International Monetary Fund (IMF) predicted that ultra-low interest rates will soon return with inflation due to fall sharply in the coming months. A number of homeowners have been hit hard by a steep increase in mortgage costs in recent months. But the Unit...