Newsletter 9th November 2022

Bank of England: Five UK Economic Insights

The Bank of England increased interest rates again on Thursday and said the UK is heading for its most prolonged recession since the 1930s Great Depression.

Here are five things about the economy's future?that we learned from the central bank.

Two-Year UK Recession

The UK is in its most prolonged recession, and the Bank of England says the next two years will be "very difficult." This has been expected for a while in the UK because the prices of goods like food, fuel, and energy have increased significantly.

Nearly Double Unemployment

The Bank expects UK unemployment to climb to 6.4% in two years.

As the economy recovered from the epidemic, jobs boomed, lowering the unemployment rate to 3.5%, its lowest since 1974.

However, recent job vacancy declines have?analysts worrying that the trend may be turning.

Mortgages May Increase By ￡3,000 Annually

The Bank of England says that the UK's unemployment rate will go up significantly over the next two years, reaching 6.4%.

The unemployment rate is at 3.5%, the lowest since 1974. This is because there was a job boom as the economy started to recover from the pandemic.

Mortgages May Increase By ￡3,000 Annually

According to the Bank of England, annual mortgage repayments might increase by ￡3,000 in certain situations. Those with fixed-rate mortgages will see their payments rise when their term expires. Many lenders "priced in" the most recent interest rate hike, which was widely anticipated.

Inflation Will Slow Next Year

Inflation reached 10.1% in September and is predicted to peak at 11% this winter before dropping the following year.

Rates Won't Rise as Much as Projected

The Bank of England raises interest rates to attempt to control inflation. People will be deterred from borrowing, leaving them with less money to spend, causing prices to rise more slowly.

With inflation projected to decline next year, the Bank does not expect interest rates to increase as much as previously predicted.

More increases are coming, so borrowing on credit cards, loans, and mortgages will still become more costly, but not to the 5.25% forecast by financial markets.

Analysts now believe they will peak at roughly 4.75% next year.