London Daily

Focus on the big picture.
Friday, May 09, 2025

Interest rate rise: Bank of England more hopeful on UK economy

Interest rate rise: Bank of England more hopeful on UK economy

The head of the Bank of England has said he is "much more hopeful" for the UK economy, as interest rates were raised to their highest for 14 years.

The decision to lift rates to 4.25% from 4% came after the inflation rate rose unexpectedly last month.

It also follows the collapse of two US banks and the rescue of Swiss lender Credit Suisse, but the Bank said the UK financial system was "resilient".

The Bank also said the UK was no longer heading into an immediate recession.

"We were really a bit on a knife edge as to whether there would be a recession... but I'm a bit more optimistic now," said Bank governor Andrew Bailey.

However, Mr Bailey warned the UK was "not off to the races", with the economy expected to grow only slightly in the coming months.

Interest rates have been rising steadily in an attempt to tackle rising prices.

Inflation, which is the pace at which prices rise, remains close to its highest level for 40 years at 10.4% in the year to February - more than five times the Bank's target.

The jump in rates means that mortgage costs for some homeowners will rise and some savers could get better returns.

People on typical tracker mortgage deals will pay about £24 more a month following the latest increase and those on standard variable rate mortgages face a £15 jump.

The Bank voted to raise rates after the unexpected rise in inflation last month, but said it still expected the cost of living "to fall sharply over the rest of the year".

It said this was largely due to the government extending energy bill help in the Budget to maintain typical household bills at £2,500 a year, as well as falls to wholesale gas prices.

However, Mr Bailey refused to say whether he thought UK interest rates had reached a peak.

The high price of energy has been the main driver behind the rise in the cost of living over the past year, with gas and oil prices surging in the aftermath of Russia's invasion of Ukraine.

Other factors such as worker shortages and food costs have also fuelled price rises.

The nine members of the Monetary Policy Committee agreed on a to raise rates by a majority of seven to two, with the Bank saying "cost and price pressures have remained elevated".

The Bank noted in its report that there had been "large and volatile moves in global financial markets" since the failure of Silicon Valley Bank in the US and the rescue deal for Credit Suisse, but Mr Bailey said he did not think the turmoil was likely to result in a re-run of the 2008 financial crisis.

In response to the rise in rates, Chancellor Jeremy Hunt said the government supported the decision.

"With rising prices strangling growth and eroding family budgets, the sooner we grip inflation the better for everyone," he said.

But shadow chancellor Rachel Reeves said higher interest rates would cause concern for families.

"The government thinks the cost of living crisis is over, but the reality is that too many families are dealing with a Tory mortgage penalty and battling with soaring food prices," she said.

Neil Sutton fears he will have to move


Neil Sutton's monthly mortgage payments were £255 before they started going up in January 2022, but they will rise to £1465 from next month.

"There's not a lot that you can do other than to try and work that much harder to find the extra £150 odd a month. I don't really have an awful lot of choice," he said.

"You know, you just despair, quietly, inwardly, but you know, I can't let that show."

Mr Sutton's 20-year mortgage comes to an end next March and he does not think he will be able to afford to remortgage.

"I guess the bottom line is that we're going to have to move," he added.

Newsletter

Related Articles

0:00
0:00
Close
Historic Papal Conclave Set to Commence in Rome
Huge Copper, Gold, and Silver Discovery in Argentina and Chile — But the Profits Go Abroad
Prince Harry is pleading for reconciliation — but the royals are just as sick of his victimhood as everyone else
The Road to Freedom: She Protested Putin, Escaped House Arrest, and Survived a 2,800-Kilometer Journey
OpenAI's Flip-Flop: No Longer Going Commercial, Back to Nonprofit, After Musk Lawsuit and Backlash
“Trump Supporter” Aims to Bring a MAGA-Style Shift to Romania
First From China: Zhao Xintong Wins the Snooker World Championship
Nvidia Faces Billion-Dollar Losses – Warns: China Is on Its Way to Becoming an AI Superpower
Trump Rules Out Third Term, Names JD Vance and Marco Rubio as Potential Successors
Mexico Says ‘No’ to U.S. Troops: President Sheinbaum Rejects Trump’s Offer to Fight Cartels
Nigel Farage’s Reform UK Storms the Map, Wrecking the Two-Party Monopoly
DOGE: Reimagining Government Operations with AI
Common Sense Returns to Britain's Legal System: UK Supreme Court Declares a Woman Is… a Woman
Beijing Says U.S. Is ‘Reaching Out’ for Tariff Talks Amid Soaring Trade Tensions
U.K. Court Rejects Prince Harry’s Final Appeal Over Police Security
Prince Harry’s Heartfelt Outburst Rocks the Royal Family
Trump Shares AI-Generated Image of Himself as… Pope, Prompting Outrage Reaction
Transgender Swimmer Secures Five Gold Medals at U.S. Masters Championship
Prince Harry: “I Want Reconciliation with My Family”
Germany's Alternative für Deutschland (AfD) party has now been officially labeled “right-wing extremist” by the federal office for the so-called “protection of the constitution.”
Amazon Launches Satellite Internet Service Amidst Competition with SpaceX
Transformative Changes in Women's Wrestling: The Rise of WWE Superstars
The Rush to the White Gold: Global Investment Surge in Natural Hydrogen Exploration
This is a day in Spain without electricity and internet
Reform UK Surprises in British Elections, Challenging Traditional Two-Party System
180-Year-Old Christian University in South Carolina Announces Closure Due to Unmet $6 Million Fundraising Goal
Brazilian Woman Jailed for Fourteen Years for Writing “You Lost, Idiot” on Statue During Protest
Trump Administration Removes National Security Adviser Mike Waltz Amid Signal Chat Controversy
Dutch Politician Eva Vlaardingerbroek Receives Spyware Threat Alert from Apple
Paramount Board Considers Settlement in Trump’s $20 Billion Lawsuit Over "60 Minutes" Interview
U.S. Economy Shrink in Trump’s First Quarter as Tariff Policy Raises Questions
Deadline Looms for RTS Meter Replacement: Hundreds of Thousands at Risk of Heating Disruption
Sweden Grapples with Deadly Gun Violence: Suspect Arrested After Three Young Men Killed in Uppsala Hair Salon
Walz Reveals Why Harris Chose Him as Her Running Mate and Reflects on Democratic Losses
Spain Restores Power After Unprecedented Nationwide Blackout
Carney Secures Liberal Mandate in Canada’s Federal Election
Death Penalty Sought as Luigi Manion Pleads Not Guilty in CEO Murder Case
President Trump contacts Jeff Bezos after reports of Amazon considering listing tariff surcharges; company clarifies no such plan for main platform
Spain and Portugal Recover from Massive Blackout
Liverpool Clinches Record-Equalling 20th English League Title Under Arne Slot
Singapore Politicians Warn Against Foreign Interference in Election
Driver Ploughs into Vancouver Festival Crowd, Killing Nine
Depression, Fear of Defamation, and a Tragic End: New Details on Virginia Giuffre’s Suicide
“Sharia for UK, Allah Akbar!”
Massive Explosion at Iran's Bandar Abbas Port Linked to Suspicious Chemical Shipments
Incident Reflection: A Harsh Reality Check
Pakistani migrants to Danish man: “ “We have 5 children while you have 1 or 2. In 10 years, there will be more Pakistanis than Danes here.“
Clashes Erupt in London as Tensions Rise Between Indian and Pakistani Communities
Specialized anti-drone weapons deployed among security personnel Ahead of Papal Funeral
How do you fix this culture?
×