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Marcus Ashworth and Stuart Trow

The Next BOE Rate Hike Could Drive Up Borrowing Costs

Get a mortgage while the deals are good. Other sources of financing are already high and will likely increase.

And there’s no interest in savings.

And there’s no interest in savings.

Photographer: Oli Scarff/Getty Images Europe

With U.K. retail price inflation over 7%, there is clear justification for the Bank of England's monetary policy committee to deliver a second consecutive interest rate hike to 0.50% at its upcoming meeting on Feb 3. Sadly for the average person, it is more likely to be felt in higher borrowing costs than actually securing anything much above zero for your savings.

The first baby raise of 15 basis points from the BOE in mid-December hardly registered among the high street banks — only a handful of financial institutions bothered to alter either their lending or savings rates. But a second hike coming so soon will be a different matter, especially with the BOE running down its holdings of government bonds. It is a less obvious way to tighten financial conditions but it will have a serious impact on the ease of access to credit and the cost of finance. In effect, it will be a double whammy.