Discount rate decision: “The price of everything is going up faster than an octogenarian on Viagra”

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Tomorrow, the Bank of England announces its latest Bank Rate decision. Another quarter percent increase is expected. But is it the right thing to do? Ian Hewett, who directs The Bearded Brokeris unconvinced: “With the price of everything rising faster than an octogenarian on Viagra, I think it would be rude for the Bank of England to raise rates, especially as controlling inflation is his mission. The increase in fuel, food, utilities, and then mortgage payments will make things very difficult for a lot of people.

Alastair Hoyne, Managing Director at Specialty Broker, finanze, is also skeptical, but recognizes the Threadneedle Street dilemma: “Should the Bank of England raise interest rates? Without a shadow of a doubt, yes. Can consumers and households afford it? Not far from here. Households are so indebted that even small rate hikes have the ability to cripple people financially. They hang over the average household like the sword of Damocles and the Monetary Policy Committee knows it. The Bank of England is in an almost impossible position.

Marcus Wright, of Bolton Business Finance, believes that the Bank of England’s hands are finally tied, however difficult the decision and however futile it may be: “Most people in the financial sector are expecting a rise rates this week to try to dampen inflation. However, it’s not clear that this will help with our mostly Covid-related hangover from supply chain shortages and an energy crisis created by years of poor energy policy. Raising the cost of borrowing now will hurt many small businesses and households, but the Bank of England is likely to feel it has no choice.

Scott Gallacher, Chartered Financial Planner at Independent Financial Advisers based in Leicestershire, Rowley Turton, is also not convinced that rate hikes will do much given the causes of inflation: “Raising interest rates to control inflation is the wrong policy at the wrong time. Current inflation in the UK is mainly due to external international factors such as rising gas and oil prices and Chinese supply issues due to Covid. Trying to curb domestic demand, and therefore inflation, by raising interest rates therefore seems naïve at best. The cost of living crisis will more than dampen UK consumer demand. And UK consumers don’t need a double whammy of rising mortgage payments and rising bills.

Adrian Kidd, Chartered Wealth Manager at Aylesbury EQ financial planning, also has his doubts: “There are huge economic decisions to be made at the moment and the terrible situation in Ukraine has further confused the cards. I hope the Bank of England chooses to do nothing, because excessive tightening will lead to an even worse fate, namely recession. Further pressure on the consumer is not necessary at the moment, in my opinion.

Rob Gill of Altura Mortgage Finance is also concerned about the impact of rising rates on the economy:The Bank of England is caught between a rock and a hard place as it seeks to balance the importance of tackling inflation with the risk of stifling economic recovery. Rising fuel bills and taxes are already expected to hit households with a double whammy in April. Making it a triple of higher mortgage payments is not without risk for an economy still recovering from the pandemic and facing the uncertainty of a war in Europe.

Dominik Lipnicki, director of Your mortgage decisions, is also not sure that rate hikes will do much: “There are specific reasons for the current inflation we are seeing and raising the Bank of England base rate will do very little to solve the problem. We have all seen huge increases in energy prices and more are yet to come. Coupled with the upcoming National Insurance hike, many people are already having to choose between heating and eating. By increasing their mortgage payments, this financial pressure will only get worse. Most agree that we have a very difficult year ahead and that raising rates is not the answer. »

Scott Taylor-Barr of the Shropshire-based broker, Carl Summers Financial Services, agrees: “Is rising interest rates really helpful in adding to what is widely touted as the biggest drop in our standard of living in decades? Inflation isn’t going up because we’re all feeling high and spending our money on luxuries, it’s going up because the basics of life are skyrocketing. Fingers crossed that the Monetary Policy Committee sees this and doesn’t add to the misery, because increasing people’s mortgage payments is not going to lower the price of gas.

However, Graham Cox, founder of the Bristol-based company Self-Employed Mortgage Hub, believes we need to swallow the drug of rising rates, however sour it may sound: “As much as it adds to the existing pain, I think we need to wean the economy from its reliance on ultra-high interest rates low. Inflation is in full swing and could stay high for a few years. This will cause enormous damage to the economy if we are not careful.

What we all agree on is that the Bank of England faces a hell of a decision.

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