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Latest 2023 interest rate predictions UK

Interest rates have been unpredictable recently, with homeowners and aspiring buyers feeling the impact of this. Whether you have a current mortgage, or are looking to buy this year, it is important to pay attention to any changes in UK interest rates.

Interest rates can have a huge effect on the monthly payments for your mortgage. Costs could soar if you are on a variable or tracker rate and UK interest rates go up.

What has been predicted about UK interest rates?

As of March 2023, the standard rate of interest was set at 4.25% by the Bank of England (BoE). This was an increase of 0.25% from the previous level of 4%. The BoE raised rates to try and combat rising inflation levels, with rates increasing notably following last years Autumn mini budget.

UK inflation has been sat at above 10% for several months (currently 10.1%) – and the ideal target is 2% for healthy economic growth. This means that inflation is far higher than expected, and its UK households feeling the pinch because of this. Though the Government has offered several support schemes (including cost of living payments and an Energy Price Guarantee), many families are struggling.

With high inflation contributing to a long term cost of living crisis, the Bank of England will likely continue raising interest rates to try and stabilise the economy. Many economists believe interest will now peak at around 5% in the UK by Summer 2023 (August).

Bank of England interest rate predictions

The Bank of England has raised UK interest rates the last 11 times a vote was held. The Monetary Policy Committee or ‘MPC’ meets and votes on the UK rate of interest 8 times each year (roughly every 6 weeks).

With frequent meetings, the potential for changes within a short space of time increases. The next meeting will be held on the 11th May 2023 and it is expected rates could hit a high of nearly 5% by August.

If working out your monthly budget or considering a new home purchase, it will be worth keeping an eye out for announcements around this time. It is quite likely that without a drop in inflation, rates will continue to rise. Here, we have some examples of when rates have been raised (or cut) based on UK current events:

  • Following the UK financial crash of 2008 (a drop of 4.5% to 0.5%)
  • In 2016, after the Brexit vote (a further cut of 0.25% which increased to previous levels in 2017 and then up to 0.75% in 2018)
  • The Covid-19 pandemic resulted in several cuts down to a low of 0.1% (in March 2020)
  • 11 consecutive rises have followed this, leading to the current 40 year high of 4.25% interest

It is hard to say exactly what will happen with mortgage rates, as various factors can affect this. Mortgage lenders can set their rates independently to the Bank of England (tracker mortgages not included). However, you will often find that if the BoE rates rise, lenders will follow suit and raise theirs.

The key things that can suggest UK interest rates will rise or fall include:

  • High chance of the UK falling into recession (the economy shrinking)
  • The Monetary Policy Committee (MPC) doesn’t support low rates unanimously
  • High levels of inflation in the UK (interest rate rise)
  • High levels of unemployment (interest rate rise)
  • Average wages rising (interest rate rise)

It can be a good idea to keep an eye out for all these things, to help you plan accordingly. All the above factors could indicate a possible change in mortgage interest happening soon after.

How will interest rates impact mortgages?

If you have a mortgage, you might be understandably worried about the possibility of your interest rates being raised. Many UK families have struggled with an increased cost of living, so a rising prices for a big monthly expense could cause significant financial worries.

If you have a fixed rate mortgage deal, you should be able to avoid higher mortgage payments for the time being (though you also won’t benefit if interest rates drop).

Those on variable rate mortgages (standard variable, tracker, discount etc) may decide a remortgage or product switch is their best option to dodge rising costs. This can also be the case for anyone coming towards the end of a fixed rate (special rate ends this year).

If you need help with your mortgage, our skilled mortgage brokers can help. They can perform a FREE mortgage review to make sure you aren’t paying too much, as well as helping you compare available deals across the market.

With more than 20 years expertise, you can rest easily knowing you and your mortgage are in safe hands. We have helped thousands of customers get the mortgage and protection they need to look after their families. We can advise on areas such as:

  • Credit issues
  • First time buyer mortgages
  • Buy to let mortgages
  • Annual percentage rates (APR)
  • Affordability criteria

Speak to a fully qualified mortgage EXPERT for FREE, FRIENDLY ADVICE. Fill in a quick online enquiry form or call 0800 009 6559.

Related articles

Here we have more of the latest mortgage, housing and financial updates:

Useful resources

Bank of England – Monetary Policy Committee dates for 2023 and 2024

Bank of England – Interest rates and bank rate

Nationwide – Bank of England base rate changes and your mortgage

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