THE Bank of England chief is warning Brits next month’s interest rate rise will be higher than initially expected.
Andrew Bailey, the Governor of the Bank of England (BoE), reminded the nation that bank officials will “not hesitate” to push interest rates up to tackle inflation.
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He also warned that a “stronger” response than anticipated would be required.
Mr Bailey was today speaking in Washington, following a phone call with new Chancellor Jeremy Hunt.
Mr Hunt was yesterday named Chancellor, after Prime Minsiter Liz Truss fired Kwasi Kwarteng.
Mr Kwarteng was sacked after his mini-Budget rocked the market, and sent the pound plummeting.
Mr Bailey said he and Mr Hunt had an “immediate meeting of minds”.
Late last month the Bank’s Monetary Policy Committee (MPC) raised rates by 0.5 percentage points to 2.25 per cent.
The BoE is due to announce its next decision on interest rates on November 3.
Many investors think they will be raised to 3 per cent, or possibly 3.25 per cent – both of which would be much bigger moves than usual.
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The BoE boss told the crowd at the International Monetary Fund event: “The UK Government has made a number of fiscal announcements and has set October 31 as the date for a further fiscal statement.”
He said the MPC “will respond to all this news at its next meeting in just under three weeks from now”.
Mr Bailey added: “This is the correct sequence, in my view.
“We will know the full scope of fiscal policy by then but I will repeat what I have said already: We will not hesitate to raise interest rates to meet the inflation target.
“And, as things stand today, my best guess is that inflationary pressures will require a stronger response than we perhaps thought in August.”
Taking questions after his address, Mr Bailey said: “I can tell you that I spoke to Jeremy Hunt, the new Chancellor, yesterday.
“I can tell you that there was a very clear and immediate meeting of minds between us about the importance of fiscal sustainability and the importance of taking measures to do that.”
He continued: “It’s not appropriate for me to constrain the choices he makes, but the very clear message I would give, and it is a clear message for everybody, including a clear message for markets.
“I can tell you there is a very clear and immediate meeting of minds on the importance of stability and sustainability.”
How will this affect me?
Rising interest rates will affect Brits looking to borrow cash.
Lenders have reported to the BoE that the availability of credit cards and personal loans to households fell between July and September.
And according to experts, typical household borrowing is set to get even harder over the next few months.
This means that anybody approved for a new credit card or personal loan people is likely to face higher rates.
The fear is that this will force many to take riskier avenues to borrow money.
How has the cost of personal loans increased?
According to MoneyFacts, individuals hoping to borrow £3,000 over the next three years face an average rate of 15.2%, compared to 14.3% this time last year.
Those wishing to borrow £5,000 over three years are facing an average rate of 8.5% compared to 6.8% a year earlier.
The average rate on a £7,500 loan tier now stands at 6.1%, compared to 4.4% in October 2021.
And the average annual rate of interest on the £10,000 loan tier sits at 6.1%, versus 4.5% last year.
The figures are average and take into account a variety of rates available, so you could still borrow at rates that are lower, or higher, depending on your circumstances.
How have credit card interest rates changed?
The average rate across all types of credit cards including fees has hit a new high of 29.8%, according to MoneyFacts.
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The average annual rate of interest for credit cards right now has risen from 25% in October 2020 and 26% in October 2021.
Again the figures are average and take into account a variety of rates available, so your rate could be higher or lower still.
