Chancellor Jeremy Hunt has asserted that raising interest rates is the only viable option for the country to combat inflation. As households prepare for the Bank of England to implement further increases in borrowing costs, the chancellor has expressed unwavering support for the central bank's efforts to address the high inflation and the resulting cost of living crisis.
The Bank of England has already executed a series of interest rate hikes, marking one of the most aggressive moves in decades. Since December 2021, borrowing costs have risen from 0.1% to 4.5%. Financial markets anticipate another increase of at least a quarter-point during the upcoming policy meeting on June 22. Projections suggest that rates could surpass 5.5% before the end of the year.
As inflation reaches its highest level since the early 1980s, an increasing number of households are feeling the strain of elevated mortgage and loan costs. The Resolution Foundation think tank predicts that approximately 1.6 million mortgage holders will face the expiration of more affordable fixed-rate deals this year, resulting in an average annual repayment increase of around £2,300 for borrowers.
In response to the higher interest rate outlook in the UK, banks and building societies have been removing home loan options from the market and raising the costs of their fixed-rate mortgages. These lenders are working swiftly to adjust their offerings to align with the country's increased interest rate expectations.