Bank rates increased to 3.5%

This hike, the ninth time Threadneedle Street has done this in a row, will see rates hit 3.5%. The 0.5% increase is, however, 0.25% less than the 0.75% rise recorded in early November, which was the biggest hike since 1989.  

Responding to this, StepChange’s chief executive Phil Andrew said: “Rising interest rates may be designed to dampen inflation but this isn’t an instant process, and at the moment the households with the least financial resilience are facing the double whammy of both at the same time.

“It looks as if housing debt will be a particular pressure facing millions of households in 2023. It will be particularly important that forbearance continues to support households through a period of financial stress that they have neither created nor can control.

“Mortgage holders, who had typically experienced low and stable rates for some considerable time before the recent market shocks, are at the front end of the impact. With the FCA already having written out to firms to remind them of their forbearance obligations, it’s important to emphasise that no-one is immune from the risk of problem debt and that help exists if people need it.

“We know from our clients’ experience that it’s human nature to try to cope with financial difficulty until debt problems come to a head, but we very much urge anyone experiencing the beginning of any financial pressure as a result of rising interest rates to get help as early as possible, before problem debt becomes entrenched, and when there are more options available to help you.”

It follows better-than-expected consumer price inflation figures, with the Consumer Prices Index (CPI) rising by 10.7% in the 12 months to November 2022 – down on the 11.1% 12-month figure recorded in October. Despite this, this is still close to a 30-year high and is second only to the figures seen in October.  

Consumer Prices Index including owner occupiers’ housing costs (CPIH) also saw a slight going from a rise of 9.6% in October to 9.3% in November.

Many forecasters expect inflation to have hit its peak, although the economy is believed to have already entered a recession, although this will not formally be known until the growth figures for the final quarter of this year have been published.  

This decision from the Bank of England comes off the back of the United States’ Federal Reserve’s decision to increase interest rates by half a percentage point, taking it to a targeted range of between 4.25% and 4.5% – its highest level in 15 years. This was then followed by the European Central Bank, which also raised interest rates by 0.5%.