More mortgage misery for homeowners as interest rates are set to rise for the 15th time in a row

Homeowners are facing more mortgage misery as a forecast predicts Britain will suffer the worst inflation of all advanced economies this year.

The Organisation for Economic Cooperation and Development (OECD) upgraded its outlook for average UK inflation in 2023 from 6.9 per cent to 7.2 per cent – and said the Bank of England must remain ‘vigilant’ in tackling it.

It comes as the Bank is expected to hike interest rates again tomorrow – the 15th increase in a row.

Hopes are rising that a global cycle of rate rises is nearing its peak. Some business leaders think that – with recession fears looming – the Bank of England has already done enough and should stop putting rates up.

However, financial markets see a more than 80 per cent chance that UK interest rates will rise from 5.25 per cent to 5.5 per cent this week.

And the Paris-based OECD’s chief economist Clare Lombardelli – a former Treasury mandarin – urged caution over the outlook for advanced economies.

‘While inflation is coming down it’s still too high and there are reasons to worry about inflation persistence,’ she said.

She said even if rates have peaked, they ‘will need to remain restrictive until there is evidence that underlying inflationary pressures are durably abating’, limiting the scope for rate cuts ‘until well into 2024 in most advanced economies’.

Ms Lombardelli added: ‘The Bank of England is, as other central banks around the world, right to be very vigilant around what the data is showing and to react to the data as it emerges.

‘They’re taking the right action in raising rates to this point and then looking forward and judging the data as it emerges.’ The battle against inflation is already hurting UK borrowers, many of whom have seen their monthly mortgage bills rise by hundreds of pounds.

The Organisation for Economic Cooperation and Development (OECD) upgraded its outlook for average UK inflation in 2023 from 6.9 per cent to 7.2 per cent (stock photo)

Figures published by consumer group Which? yesterday pointed to festive misery for half a million borrowers when their cheaper fixed-rate deals come to an end in November, December or January. 

Many families will have to switch to higher rates at the most expensive time of year.

Britain has been slower than rival economies such as the US and the eurozone in bringing down inflation after it peaked after Russia’s invasion of Ukraine. 

It averaged 9.1 per cent last year and the expected rate of 7.2 per cent this year will be the steepest pace of price rises in any of the G7 economies.