UK braces for interest rates rise as Bank of England expected to announce biggest hike in decades

Interest rates are widely expected to be hiked significantly today. Credit: PA Wire/PA Images

The Bank of England is widely expected to be set to announce an interest rate hike today, as millions struggle with the rising cost of living.

The Bank of England is forecast to raise interest rates to the highest level in nearly three decades at midday today - from 1.25% to 1.75%.

Almost two-thirds of the public say they are concerned about rising interest rates as the Bank of England considers another hike in the cost of borrowing, amid soaring energy costs.

The Bank is expected to announce its largest interest rate rise in almost 30 years on Thursday, as the UK faces steep inflation.

Experts are warning that inflation could peak at 15%, adding to the already painful cost-of-living crisis with spiralling prices.Tory leadership hopefuls Liz Truss and Rishi Sunak clashed over their tax policies last night as Britain braced for the announcement.

(PA Graphics) Credit: PA Graphics

Former chancellor Rishi Sunak said his Foreign Secretary rival Liz Truss would further drive up interest rates, raising mortgage payments, with her plans.

Mr Sunak has faced attacks from Ms Truss for overseeing rising taxes while in No 11 during the pandemic, as she pledges a more radical plan to slash them.

He has insisted he does want to see taxes come down, but argues it is necessary to bring inflation under control before making major changes.

The former chancellor stressed there are “crucial differences” between their plans “because timing is everything”.

“If we rush through premature tax cuts before we have gripped inflation all we are doing is giving with one hand and then taking away with the other,” he said in a statement.

“That would stoke inflation and drive up interest rates, adding to people’s mortgage payments. And it would mean every pound people get back in their pockets is nothing more than a down payment on rising prices.

Rishi Sunak speaking at a hustings on Monday Credit: Ben Birchall/PA

“A policy prospectus devoid of hard choices might create a warm feeling in the short term, but it will be cold comfort when it lets Labour into Number 10 and consigns the Conservative Party to the wilderness of opposition.”

Frontrunner Ms Truss, who has been gaining backers for her campaign according to multiple polls, countered by saying “we cannot tax our way to growth” and insisting her plans would not drive up prices further.

Liz Truss is currently seen as the polling favourite to win the Conservative Party leadership race. Credit: PA

“My economic plan will get our economy moving by reforming the supply side, getting EU regulation off our statute books, and cutting taxes,” she said.

“Delivering bold reforms to the supply side is the way we’ll tackle inflation in the long run and deliver sustainable growth. Modest tax cuts – including scrapping a potentially ruinous corporation tax rise that hasn’t even come into force – are not inflationary.”

Rising interest rates spark worry

In a poll published by Ipsos on Thursday morning, 64% of people said they were fairly or very concerned about the prospect of rising interest rates – a figure that rose to 80% among those aged 18 to 34.

Some 67% said they were worried about the value of their savings, while concern about energy bills and the rising cost of living in general reached 75% and 89% respectively.

Gideon Skinner, head of political research at Ipsos in the UK, said: “We know that concern about the cost of living and inflation is at the top of the public’s agenda, with the proportion saying it is an important issue facing the country at a 40-year high in Ipsos’ long-term trends. And this particularly manifests itself in concerns about energy and utility bills and in the value of people’s savings.

“But with the Bank of England stating they need to put up interest rates to help bring inflation down, there is concern about the impact of higher interest rates too – which suggests exploring additional solutions to help people who are facing financial difficulties will be high on the public’s wish-list for the new prime minister’s government.”

Interest rates have already increased from 0.1% in December to 1.25% in June as the Bank of England attempted to keep a lid on inflation, but are now expected to increase even further to 1.75%.

The Ipsos survey, which asked 1,750 British adults about their economic concerns on Tuesday and Wednesday, also found a quarter had had to dip into their savings to deal with the cost-of-living crisis in the last six months while nearly one in five had seen their household income decrease.

Some 14% said they had increased the amount they had outstanding on their credit card while 10% said they had fallen behind in paying the bills.

The poll also found levels of economic concern were higher among younger people.

While 45% of the public in general said they were concerned about paying the rent or mortgage repayments, that figure was 59% among those aged 18 to 44 but only 22% among those aged between 55 and 75.

Similarly, 58% of 18-44s said they had faced some form of financial difficulty in the last six months, compared to 38% of 55-75s.

Mr Skinner said: “This research also shows that while concerns about the cost of living, bills and savings are shared across all age groups, worries about housing costs (and rising house prices) are particularly acute among younger people, who are already more likely to say they have experienced a range of financial difficulties since the start of the year.”

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