Interest rate warning: ‘Bank of England’s hands tied’ as UK mortgage hike now ‘obvious’


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Financial experts have warned people are in for a “serious rate shock” if rates continue to skyrocket, which will be “exacerbated if inflation is still well above target”. Ross Boyd, founder of the always-on mortgage comparison platform,, said it wasn’t a matter of if interest rates rise but when because “the Bank of England’s hands are tied”.

He said: “It’s not a case of if rates rise further, but when. The Bank of England’s hands are tied. Fortunately, many homeowners are on exceptionally low fixed rates and that will support their ability to maintain payments.

“It’s what happens when they come to the end of their fixed rates that matters now.

“Many will be in for a serious rate shock if rates continue to rise, something that will be exacerbated if inflation is still well above target.”

The comments come after the Bank of England’s chief economist warned interest rates might need to rise further in the future as the economy is hit by high levels of inflation.

Huw Pill said the 9 percent inflation rate – the highest in 40 years – is a “very uncomfortable situation” for decision-makers at the Bank.

In a speech to the Association of Chartered Certified Accountants in Wales, he said the tightening of monetary policy – which means higher interest rates – “still has further to run”.

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British consumer price inflation was at its 2 percent target as recently as July, but hit a 40-year high of 9.0 percent in April.

Central banks have pointed to supply-chain difficulties and a surge in energy prices, worsened by Russia’s invasion of Ukraine in February.

Samuel Gee, director at Bristol-based Manning Gee Investments, warned “people borrowed-to-a-hilt” they are “starkly at risk”.

Mr Gee added: “It’s obvious that rates are going to rise further, but the UK economy couldn’t likely cope with quick, sharp-shock increases.

“They are likely to be more gradual. In the US, the FED has already countered fears of supersized hikes.

“In the UK, so much is at stake. You have people borrowed-to-a-hilt who are starkly at risk, and the Bank of England knows it. Inflation does need to be controlled, but we are coming out of a pandemic and a war in Europe isn’t helping.

“We are likely to see more Government and central bank fire-fighting in the months ahead. I wouldn’t say a half-percent increase is off the table.”

Lewis Shaw, founder of Mansfield-based Shaw Financial Services, warned house owners with a mortgage that has been fixed within the last few years “will likely see a rise”.

He said: “We may see a half percent rise at the next MPC meeting. Some were calling for that size of increase at the last meeting. The MPC needs to arrest some of the inflationary pressures; however, raising rates only really works on demand/pull inflation, not the supply-side problems and cost/push inflation we are currently witnessing. So I’d expect the base rate to get close to 2 percent by the end of the year.

“This means that almost anyone with a mortgage that has been fixed within the last few years will likely see a rise in their payments when remortgaging once their current deal ends, rather than a reduction in rates as has been the case for the previous few years.”

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