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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
The Bank of England was widely expected to raise its base rate by 0.25 percentage points to 4 per cent, the first increase since August 2023. The rise would add to mortgage costs for many households and could offset some of the cost of living support announced in Labour’s Budget.
Typical tracker mortgage payments could increase by about £31 a month, while variable-rate deals could rise by around £14. The move was anticipated despite Brent crude falling to about $95 a barrel from $115 before the US midterm elections; UK inflation reached 3.5 per cent in September, above the Bank’s 2 per cent target, and energy costs were expected to add to price pressures. Unemployment was 4.7 per cent in the three months to August, while the economy grew by 0.1 per cent that month.
In short
- Bank rate was expected to rise to 4 per cent.
- Tracker mortgage payments could increase by about £31 monthly.
- Inflation reached 3.5 per cent, above the 2 per cent target.
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The case for
Raising rates could help bring inflation back towards the Bank’s 2 per cent target by cooling demand and signalling a firm response to persistent price pressures. If inflation becomes entrenched, households may face wider and longer-lasting rises in the cost of living, so a measured increase could protect purchasing power over time.
The case against
Higher rates would increase repayments for many borrowers and could cancel out some of the relief in Labour’s cost of living measures, putting added pressure on household budgets. With unemployment elevated and economic growth weak, critics could argue that raising borrowing costs risks further dampening activity, especially as falling oil prices may ease some inflationary pressure.
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