With inflation expected to remain on a steady incline, markets are now expecting the Bank of England base rate to reach 5.8 percent next year, The Economist’s Economics editor Henry Curr reported on Twitter.
UK Inflation took a modest drop from 10.1 percent to 9.9 percent in August however, rates are still hovering at a 40-year high.
But with energy bills set to increase from October, inflation rates are forecast to reach double digits again over the next few months.
The Bank of England increased its base interest rate to 2.25 percent in September, benchmarked at its highest level in 14 years, in a bid to tame the spiralling rates. But, this only means more pain for borrowers.
Graham Cox, director of Self Employed Mortgage Hub said: “If Sterling falls any more, it’s almost certain the Bank of England will be forced to step in and hike the base rate again, probably by at least 0.75 percent on top of the 0.5 percent increase last week.
“Unless the Government steadies the ship, we’re heading for a house price crash of 20-40 percent over the next couple of years.
“There are 1.8 million borrowers coming off fixed rate deals next year. They simply won’t be able to afford the mortgage payments, forcing them to sell or be repossessed.”
Lewis Shaw, Shaw Financial Services founder, said: “It’s taken less than 18 months for the UK to become the sick man of Europe once again.
“If sterling continues tanking against the dollar, the Bank of England will have no option other than to call an emergency meeting to raise the base rate again.
“Ironically, the knock-on effect of an intra-meeting hike could spook markets further and send sterling even lower. The markets don’t like desperation and right now our economy has desperation all over it.
“We need to regain momentum, which will mean real economic pain. The fiscal event last week by Kami-Kwasi has the potential to turn the UK into an emerging market, or worse still, a failed state.”
The next Bank of England interest rate review is scheduled to take place on Thursday, November 3.