Markets have been anticipating a rise in interest rates for several months, which currently stand at 3.75%.
At the last meeting of central bank policymakers, three of the nine-member committee wanted to raise interest rates by 0.25%. These sentiments have reinforced that a rally may be imminent.
But according to AJ Bell, the Bank of England is expected to keep interest rates at 3.75% for the sixth time in a row on Thursday.
He said that three members of the Monetary Policy Committee are likely to continue pushing for a rate hike.
But there was a good balance to be found, which could lead to holding at 3.75%.
Danny Hewson, head of financial analysis at AJ Bell, said: “If policymakers raise interest rates too quickly, it could cause unnecessary pain to the UK economy, disrupting already fragile growth and increasing the difficulties faced by many struggling to find work.”
“On the other hand, if rising costs, especially energy and food costs, become entrenched and employers feel trapped into offering pay rises to break up inflation, MPC members will be blamed for not acting proactively to prevent inflation from igniting, especially since the ECB has now taken two steps to tighten policy.”
Inflation data is due out on Wednesday and is expected to show a small jump, according to Howson. The Consumer Price Index reached 2.9% in July.
But Hewson believes this rise will not be enough to prompt the Bank of England to increase borrowing.
“(The CPI) is still well below where it was the last time the bank moved to raise interest rates at the end of 2021,” she said.
“Although there are some similarities back then, inflationary pressures were widespread, supply chains were disrupted by the pandemic, labor shortages were widespread, and demand was rebounding strongly as economies reopened.”
How the interest rate decision will affect your mortgage
The decision comes as mortgage lenders have raised fixed interest rates with several major providers, including Santander, Barclays and Nationwide, adjusting their rates upwards.
This means that for anyone taking out a fixed rate mortgage, the Bank of England base rate will have no effect.
Indeed, Sarah Coles, head of personal finance at AJ Bell, explained: “Fixed trades are largely based on price expectations, as these feed into government bond yields which drive the swap markets where these rates are set.
“The fact that government bond yields have risen so significantly means that there is still a lot of upward pressure on fixed interest rates.”
Advice to anyone about to take out a mortgage at the moment is to seek guidance from a broker to ensure you find the best rate and most suitable deal for your needs.
It is also not recommended to hang around when interest rates are low.
“Borrowers shouldn’t panic, but anyone approaching the end of a fixed interest rate would be wise to start looking early,” Andrew Montlake, chief executive of London-based Coreco, told Newspag.
“In this market, waiting and hoping for a cheaper price tomorrow can sometimes mean watching the day disappear.”
