Future decisions by the Bank of England (BoE) are currently being put under the microscope by industry professionals, with many expecting a further rise in interest rates at the Monetary Policy Summary (MPC) meeting next week.

With HSBC raising the price of its mortgages for the second time in a week, many believe that interest rates set by the BoE are only going to increase.

Interest rates have been steadily increasing since December 2021, when they sat as low as 0.1%, to 4.5% at the MPC’s latest meeting last month. Some experts are predicting that rates could hit a “staggering” rate of 6% by the end of the year, in a battle to tackle inflation.

Head of investment analysis at AJ Bell, Laith Khalaf, said: “The BoE is caught between a rock and a hard place, as it has to choose between pushing more mortgage borrowers towards the brink and letting inflation run riot.

“The latest readings for core inflation and wage growth have come in hot, and that has spooked the market, sending gilt yields skywards and raising expectations of more interest rate hikes to come. The market is now firmly pricing in an interest rate rise at the MPC’s June meeting, and then four further hikes, taking us to 5.75%.

“A few hawkish comments from the BoE, or some more ugly inflation data, could easily tip those expectations up to 6%. While interest rates may not ultimately hit those heights, those expectations do set market pricing in the here and now for government bonds, cash accounts and mortgages.”

However, there is a cautious optimism that there is an over-exaggeration by the markets, even though according to head of money and markets at Hargreaves Lansdown, Susannah Streeter, “the path ahead is clouded in uncertainty.”

“The market may be over-estimating how many rate rises are in the pipeline,” Streeter said. “This is partly because the current reaction on markets could be doing the BoE’s job for it. The expectation that rates could head above 5.5% has seen the better mortgage deals whipped away, which will seriously weaken the spending power of the 1.3 million households having to remortgage this year.

“Government borrowing costs have spiked, reducing its spending arsenal ahead of any election. There is a chance that inflation will fall back much more quickly than the markets expect.”

With mortgage rates also on the rise, the financial worry for those looking to remortgage their homes will be present as rises to fixed-rate deals do not look like they will end any time soon.

Head of personal finance at Hargreaves Lansdown, Sarah Coles, said: “Higher rate expectations mean gilt yields have soared – the two-year gilt yield has risen higher than it did in the aftermath of the mini budget. Higher rate expectations have been priced into fixed rate mortgages, which have risen quickly since inflation figures in May, and dramatically after jobs data on Tuesday.

“The average two-year fix cost 5.75% on 13 June, and 5.9% just 24-hours later. Meanwhile the average five-year fix rose from 5.44% to 5.54%, according to Moneyfacts. We’ve seen HSBC raise rates twice in a week, and this won’t be the last of it.

“This has proven a nightmare for anyone going through a remortgage process. Mortgage deals are still a long way shy of the peak in October. However, they’re streets ahead of the rates most remortgagers are currently paying – because most fixed for less than 2%.”

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