The Bank of England (BoE) is preparing to hike interest rates by 75 basis points to 3%, according to multiple reports. 

Yahoo News says financial markets are anticipating such a hike.

Meanwhile, Reuters quotes investors pinning a ‘90% chance’ on said hike occurring. The news agency adds that according to a poll it carried out, ‘a sizeable minority’ expect a bigger increase – to 3.25%.

“On Friday,” Reuters continues, “analysts at ING forecast a smaller, 50-basis point rise.”

The next Monetary Policy Committee (MPC) meeting, scheduled for tomorrow (3 November), could see the largest rise since 1989 and reach the highest level since the 2008 crash. 

In September, the BoE increased the base rate by 50 basis points to 2.25%.

Commenting on tomorrow’s meeting, Self Employed Mortgage Hub director Graham Cox says an increase of 0.75% “may not lead to a similar hike in fixed-rate mortgages, simply because the latter is already overpriced following the mini-Budget debacle”.

Cox says: “But even if fixes remain largely unchanged or increase just 0.25% in response, affordability is likely to remain extremely restricted.”

“Even tracker rates, which are considerably cheaper, are likely to be well above 5% by the middle of next year. Unfortunately, the pain will continue for the nation’s borrowers until the inflation beast is tamed.”

Meanwhile, Create Finance director Aaron Forster suggests that while another rate hike is “likely” to happen, “it isn’t all bad news for borrowers”.

Forster comments: “Swap rates, which is the rate at which lenders borrow money, have reduced in recent weeks, which has meant there has been a decrease in some mortgage rates. So even though it’s likely we will see a rate rise, mortgage rates may not be immediately impacted.”

“The only mortgage type that this will impact is tracker rates as these are linked to the BoE base rate. Fixed rates and discounted rates aren’t linked to the bank’s base rate and therefore these rates may not be immediately impacted by any change.”

Also commenting, Mather and Murray Financial independent financial advisor Samuel Mather-Holgate says: “The BoE’s mandate is to target inflation at 2% so it will almost certainly increase interest rates, most likely by 0.75%.”

“If they were given a wider mandate than the one they have, namely trying to reduce volatility in the country’s GDP, the decision might be different and create better outcomes.”

However, Mather-Holgate comments: “We all know we are in the mouth of a recession. This will mean dramatically slowing inflation, if not deflation and a crumbling economy. The BoE will then be forced to reduce rates.”

“Rather than making decisions with historic data and hindsight, I’d like to see Threadneedle Street trying to forecast where the economy is going and making decisions in the best interests of the economy. This would see rates being held at their current level and this could last for longer, before considering reductions.”

Mather-Holgate says he expects the bank rate to “go up by 4% by early Spring”.

Carl Summers Financial Services financial adviser Scott Taylor-Barr explains that this rise has been “well publicised by the BoE”. 

“They were talking about a 1% rise earlier in October, so most lenders’ fixed rates are already accounting for this increase and most brokers will have been talking to their clients looking at variable rate deals with this increase already in mind.”

Taylor-Barr says the impact of the 0.75% to 1% rise “should be minimal”.

“However, a rise of less than 0.75% or over 1% would be a surprise to the market and we’d see rates move quickly to account for that. What will be interesting, and potentially have a bigger effect, is when the minutes of the MPC meeting are made public, as that will give an indication as to where the bank is likely to see future rate changes heading,” he adds. 

Riverside Mortgages founder Lewis Shaw says borrowers “shouldn’t fear” tomorrow’s base rate increase as “mortgage lenders have already priced in this hike”.

Shaw explains: “The only mortgage holders affected will be those on trackers and a smaller number on standard variable rates.”

“The rationale for increasing the base rate is to try and drive down the inflation rate to 2% in line with the BoE’s mandate. In a bid to do this, we could easily see base rate as high as 4.5% by July next year.”

SPF Private Clients chief executive Mark Harris adds: “The market is expecting a 75 basis points rise, taking base rate to 3%. I tend to agree but it could have been worse if the Liz Truss government had continued.”

“Swap rates have eased by more than 100 basis points over the past month since the furore surrounding the mini-budget has settled. Some lenders have been reducing their fixed-rate mortgages accordingly. While we don’t think base rate will peak at 3%, we don’t believe rates need or can go much higher.”