Image source, Patrick Reid

Patrick Reid owes £25,000 in loans and credit cards.

He's worried about how much another hike in interest rates will cost him.

"Any increase will be hugely noticeable," he says.

"At present I repay around £1,800 a month but I have worked out that I will conservatively need to pay another £250 a month to keep up with the debts.

Based in London, Patrick owns his own business and says his income is "good".

"But if my customers drop off it will be financially painful," he says.

"I will simply have to tighten my belt and be extra cautious in my spending, which means all of those non-essential items will be cut from my budget."

Simon Read
Personal Finance Reporter

Image source, Getty Images

When the Bank of England raises interest rates, consumers won’t feel the effect at once.

While the estimated two million borrowers on a tracker or standard variable rate mortgage will see their rate rise in line with the increase, the new rate probably won’t take effect immediately.

Most lenders usually switch to the new rate at the start of the following month, which give borrowers a few weeks to prepare for the changed monthly repayment.

Looking at other rates – such as saving, loans and credit – they’re not generally linked to the base rate so changes will be down to individual banks, building societies and credit companies.

The businesses are in heavy competition with each other so will be closely watching what rivals do.

Some may try and get an advantage and attract new customers by raising rates more quickly to target savers, or more slowly in the case of credit cards and loans.

Image source, .

Former Bank of England Monetary Policy Committee member Andrew Sentance told BBC Radio 4’s Today programme earlier that he believes the BoE have “got behind the curve” with raising interest rates.

Sentance says successive quarter point rises have been “quite small steps” given the current high rate of inflation.

“The BoE is really trying to play catch up.

"That’s why people are now talking about a much larger increase this meeting than the quarter point steps we’ve had before,” he says.

He adds that he thinks there’s a case for “going further than half a per cent” and making a three-quarter-point interest rate rise.

Image source, Getty Images

Most of us are aware that inflation - the rate at which prices are rising – is soaring but how does raising the interest rate help to calm inflation?

The theory is that raising the rate encourages people to borrow less and spend less. It also motivates people to save more of their money.

But Andrew Bailey, the governor of the Bank of England, has admitted it faces a difficult balancing act.

Raising the rate may put the brakes on inflation but it could also dampen wider economic growth.

The UK economy grew by 0.5% in May, external.

Bailey has urged caution at characterising that as “strong” because May included an extra working day when a bank holiday was moved to 2 June to commemorate the Queen’s Platinum Jubilee.

The Bank of England is expected to give an updated forecast today on where it sees UK economic growth heading.

Personal finance expert Gemma Godfrey has just been speaking to the BBC.

She says families are already struggling and “fighting a war on all fronts”.

A rise in interest rates will add to their problems, she says, as the cost of borrowing will go up.

“It is of deep concern that now not only are people going to be struggling to feed their families, keep their homes warm, also even just get to work,” she says.

Image source, Reuters

Mortgages

If you own your home, the chances are you've got a mortgage.

If you're on a fixed rate, that won't budge whatever happens to interest rates today.

But if you're on a tracker or standard variable rate - and interest rates rise - your monthly payments will also go up.

Credit cards and loans

Even if you don't have a mortgage, changes in interest rates could still affect you.

Bank of England interest rates also influence the interest charged on things like credit cards, bank loans and car loans.

Savings

The Bank's decisions also affect the interest rates people earn on their savings.

Individual banks usually pass on any interest rate rises - giving savers a higher return on their money.

But for people putting money away, interest rates are not keeping up with rising prices.

Three things to watch out forpublished at 10:29 British Summer Time 4 August 2022

10:29 BST 4 August 2022

Faisal Islam
BBC Economics Editor

There are three significant things to watch out for at noon.

First, what size of interest rate rise, which is widely expected to be the largest in a quarter of a century. Other major central banks across the world are raising by large amounts as they seek to smash down rampant inflation.

Second, the new forecasts from the Bank, which could show yet again inflation peaking higher and lasting longer than previously calculated. The forecasts will also show the delicate balancing act with recession as households find their disposable income drained by surging energy bills.

Last, the first indication of how the Bank of England hopes to reverse more than a decade’s worth of pumping money into the economy by buying up debts - something known as “quantitative easing”. Reversing that could put up longer term interest rates paid on mortgages and by businesses.

It’s a big day for the UK economy, for the Bank of England, and also for the two candidates for PM.

Image source, Getty Images

A rise in interest rates is a difficult pill to swallow but the UK has seen bigger borrowing costs.

In November 1979, the rate peaked at 17% under Margaret Thatcher’s Conservative government amid high inflation and remained in double digits for much of the 1980s.

The UK’s current interest rate is 1.25%.

Image source, .

In 2007, it stood at 5.75% before the financial crisis meant the Bank started to slash rates.

Since then, it has fallen to historically low levels.

In August 2016, the Bank of England cut it to 0.25% after the UK referendum on leaving the European Union.

Borrowing costs subsequently rose again but then the Covid pandemic hit and in March 2020 the Bank announced two rate cuts in the same month, taking the interest rate to 0.1% where it stayed until December last year.

At that point the Bank’s rate-setting Monetary Policy Committee voted to increase it to 0.25%.

A rate rise announcement at midday today would be the sixth consecutive rise.

Image source, Yui Mok/PA Wire

Good morning and thanks for joining our live page on the Bank of England’s expected interest rates rise.

Stick with us as we bring you the latest today - here’s what we know so far:

• The Bank of England is set to announce its latest decision on interest rates at midday
• Rates are widely expected to be raised for the sixth time in a row
• Interest rates currently stand at 1.25% but the central bank could increase them to as much as 1.75%
• If so, that would be its highest level since December 2008
• The Bank hopes to slow the rate at which prices are increasing. It has warned that inflation could pass 11% later this year