The Bank of England is expected to raise interest rates next week, putting further pressure on mortgage repayments.

The nine-member Monetary Policy Committee (MPC), which meets eight times a year to decide the UK’s official interest rate, is expected to raise the Bank’s base interest rate from 3% to 3 .5% in December.

That would take rates to their highest level since the 2008 global financial crisis.

The forecast 0.5% increase would reflect a steadier trend in rate hikes since the Bank’s MPC backed a 0.75% increase last month, the biggest increase since 1989.

Economists at Deutsche Bank, a German multinational investment bank, said they expected the rate to rise to 3.5% at next Thursday’s meeting.

A spokesperson for the bank said: “Good news on easing inflation expectations and easing recruitment difficulties will allow the MPC to slow the pace of tightening, avoiding a second consecutive 75bps” . [basis point] hike.

But the Bank is not out of the woods yet.

“Long-term inflationary pressures coupled with ongoing labor market tensions should lead to a further ‘vigorous’ rise.”

Deutsche Bank predicted that rates could rise to as much as 4.5% in 2023, an improvement from the bank’s previous forecast of 5.25%.

ING experts have predicted that the rate will peak at 4% next year.

ING’s James Smith, Antoine Bouvet and Chris Turner wrote in a note to investors following the 75 basis point hike in November: “The forecasts published at the time suggested that keeping rates at 3% would lead of inflation (only) in two years, while raising them to 5% would see an undershoot.

“In other words, we should expect something somewhere in the middle, and that’s why we think the Bank Rate should peak at 4% early next year.”

Andrew Bailey, Governor of the Bank of England, sought to calm market expectations for the final interest rate hike at the previous MPC meeting, amid an improving pound value and government borrowing rates since September.

Nonetheless, a decision to hike rates on Thursday would be the Bank’s ninth straight hike.

The interest rate was 0.1% between March 19, 2020 and December 15, 2021 and has been increasing ever since.

The monetary policy committee will meet on Thursday to set the interest rate for the UK

Andrew Bailey hopes to calm expectations of rate hikes as lending rates improve

The rise comes as the Bank of England seeks to rein in inflation that economists have linked, in part, to war-related energy price hikes in Ukraine, associated labor shortages to Brexit and supply chain disruption since the pandemic.

Higher import costs and labor shortages limit the supply of available services, raising prices for consumers.

Rising interest rates increase the cost of borrowing money, prompting consumers to save rather than spend.

Reduced demand for goods and services in theory prevents costs from rising too quickly when stores freeze or lower prices to encourage spending.

The UK inflation rate reached 11.1% in October 2022.

Money Supermarket says an interest rate increase of 0.5% would add £56 a month to a £200,000 25-year mortgage for those on a mortgage follow-up deal.

That would total an additional £672 over the course of a year.

Tracker mortgages evolve according to changes in the base rate.

Updated Variable Rates and Standard Variables do not “follow” the base rate directly, but can be influenced by a rise in the Bank of England base rate.

Monthly payments for fixed rate mortgages will not be affected by the change.