UK braces for likely biggest rate hike in decades

Analysts predict an increase of up to 0.75 percentage points, taking rates up from 2.25 percent to 3 percent, the BBC reported.

The interest rate influences things like mortgages, repayments on credit card debt and the interest paid on savings accounts.

Interest rates have been rising since Dec. in an effort to curb inflation.

Interest rates affect how much money a borrower has to pay back when returning the money in a loan.

A higher interest rate makes it more expensive to borrow money, the report explained.

That encourages people to borrow and spend less, and save more - which in turn calms inflation.

Thursday's expected rise follows economic turmoil under Liz Truss's government; though things have calmed slightly since Rishi Sunak took over, said the BBC.

Sunak has promised a new plan to repair the nation's finances later in Nov. while the tax rise and spending cuts were expected.

The rate hike is by the Bank of England -- the UK’s central bank, which is independent of the government.

It tries to maintain financial stability and sets the UK’s official interest rate.

It has a target to limit inflation to two percent each year - but recently, prices have been rising at about five times that level, the BBC said.

The Bank has repeatedly been forced to raise interest rates recently, and looks set to carry on.

But it’s a balancing act. The Bank doesn’t want to slow the economy too much with its interventions.

Higher interest rates will mean higher repayments on things like mortgages, credit cards and car loans - increasing the financial pressure on lots of households.

A hike in interest rates will drive more workers into debt and other forms of financial hardship, a major trade union has warned, the BBC report said.

A survey of 6,000 people on behalf of Unite has revealed that more than half cannot or will have difficulty paying their bills this year.

The union's general secretary Sharon Graham says their research shows many workers "face unsurmountable financial pressure".

The poll also suggests more than two thirds of workers have experienced a real-terms pay cut this year (when their wages are rising at below the rate of prices).

Graham went on to argue that the problem which is driving inflation is not worker's wage demands, but rather "corporate greed", the BBC added.

Renters could find it more difficult to find properties in the next year or two as landlords struggle with higher mortgage rates, an expert told MPs on Wednesday.

About 40 percent of landlords have a mortgage on their rental properties.

The BBC report quoted Victoria Scholar, head of investment at Interactive Investor, as saying that the Bank of England is "likely to be divided", with some policymakers on its Monetary Policy Committee pushing for a smaller increase in the base rate of 0.5 percentage points.

"The size of the increase will signal how concerned Bank of England policymakers are about inflation versus a recession as it looks to curtail further price rises without inadvertently causing unnecessary economic pain," she said.

She pointed out that the mortgage market has calmed down since former Chancellor Kwasi Kwarteng's mini-budget and the U-turns that followed.

But she also added that about two million borrowers on variable rate mortgages look set to face increased payments after Thursday's decision.

The war in Ukraine and the long recovery from the pandemic have also contributed to rising energy and food costs.