2023 interest rates rise

Posted 30th May 2023 by sdlt-admin

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The Bank of England has raised interest rates to their highest levels in almost 15 years.

Seven members of the Bank of England’s Monetary Policy Committee (MPC) voted to increase the base interest rate to 4.5 per cent from 4.25 per cent, reports HullLive. The remaining two members voted against the change, stating that inflation was expected to fall considerably this year without needing to raise the rate again.

They said a lot of the impact of rising rates hasn’t yet shown itself through the economy, with the Bank estimating around a third of the impact of rate increases having passed through. Meanwhile, the committee said there have been “repeated surprises about the resilience of demand” with inflation being stronger than expected as the price of food and other products were higher.

Read: How much Stamp Duty do I pay on a second home?

The Bank of England has warned the increase in the cost of living is expected to fall more slowly than previously thought but the Government’s promise to halve inflation by the end of the year is still narrowly on track. The Bank said it expects Consumer Prices Index (CPI) inflation to reach just over 5.1 per cent by the final quarter of this year.

This prediction suggests that the Government will only just manage to hit its target to bring inflation below 5.35 per cent. It comes as the monthly increase in food prices has reduced slower than previously expected.

Economists at the Bank have also released a record upgrade to its gross domestic product (GDP) expectations. It is now expected that the GDP will be 2.25 percentage points higher at the end of its three-year forecast period than thought in February – the largest upgrade since 1997 when the Monetary Policy Committee (MPC) was formed.

The Bank of England’s Monetary Policy Committee (MPC) said in a report: “In the modal forecast conditioned on market interest rates, and taking account of stronger paths for food prices and demand growth, CPI inflation is expected to decline somewhat less rapidly compared with the February report. Risks remain but, absent a further shock, there is likely to be only a small impact on GDP from the tightening of credit conditions related to recent global banking sector developments.”

The Bank said it expects the banking crisis will reduce US GDP by around 0.25 percentage points but will have a much smaller impact in Europe.

It added: “The committee judges that growth over much of the forecast period will be materially stronger than in the February report. This reflects stronger global growth, lower energy prices, the fiscal support in the spring Budget and the possibility of lower precautionary saving by households than previously thought.”

Read: How long does a Stamp Duty Refund take?

Rising interest rates will have an impact on UK households. David Hannah, group chairman of Cornerstone Tax, said: “I think it’s a complete mistake to raise interest rates again, this may tip the economy into recession.

“I think the Bank of England should have called a hold on any rise in rates for one month to see what happens to inflation in May. Today’s announcement is also set to affect first-time buyers who may now be unable to make a first step onto the housing ladder due to unaffordable mortgage rates.”

Rachel Springall, finance expert at Moneyfactscompare.co.uk, said: “The consecutive Bank of England base rate rises have had a positive impact on variable savings rates but these rises may not have been passed on to everyone. As we edge closer to the mid-way point of 2023, it is a sensible time for savers to take a step back and review their whole portfolio.”


Have you purchased UK property in the last 4 years? Did you pay Stamp Duty? See if you are eligible for a refund from HMRC on overpaid SDLT


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