1.5m UK homeowners on variable rate mortgages face new borrowing rise

theguardian.com:

Almost 1.5 million homeowners with variable rate mortgages face higher borrowing costs with the Bank of England expected to push up interest rates on Thursday to 4.5%.

A poll of City analysts found there was a 96% chance the central bank would increase its base rate by 0.25 percentage points when policymakers meet to tackle Britain’s stubbornly high inflation rate.

Another 1.5 million households with fixed-rate mortgages will see their annual bills spiral by an average £3,000 when they re-finance their loans this year, afterthe average two-year fixed rate jumped from below 2% to 4.75% over the past 18 months.

The near certainty of a 12th consecutive increase follows a series of speeches by central bank policymakers arguing in favour of higher borrowing costs to bring down the highest rates of inflation in 40 years to more sustainable levels.

“It is very difficult to see the Bank of England doing anything else,” said George Buckley, chief UK economist at Nomura. “According to the markets, there is only a 4% chance of them holding rates where they are.”

In March, the consumer prices index (CPI) dipped only sightly to 10.1%, down from 10.4% in February – higher than the 7% inflation rate in the 20-member euro currency bloc and 4.9% in the US.

While the BoE’s monetary policy committee (MPC) has forecast a drop in inflation to below 1% in two years based on the current level of interest rates, it has argued that progress is too slow.

In a recent speech, chief economist Huw Pill urged British households to restrain pay demands and businesses from hiking prices, saying they “need to accept” they are poorer.

Pill said a game of “pass the parcel” was taking place in the economy – as households and companies try to pass on their higher