The bank’s monetary policy committee (MPC) will reveal their latest base rate decision this coming Thursday. The base rate is currently at three percent with some experts predicting it could rise to 3.5 percent this week, a smaller increase than the previous hike of 0.75 percent.
In light of the growing interest rates, analysts at Hargreaves Lansdown are predicting an economic downturn of at least 12 months for the UK.
The firm said: “This is likely to lead to an increase in unemployment and is set to dent the profits of some companies will be affected, which in turn will mean the government won’t be able to collect so much in tax to pay for public services.
“But it is hoped that lower demand for goods and services should help bring down inflation.”
As reported by the Guardian, Joe Nellis, professor of global economics at the Cranfield School of Management, warned: “We are going to experience a sustained fall in living standards over the next two years the like of which we haven’t seen in 100 years. We are in a precarious position.”
READ MORE: Triple lock warning as policy ‘will only last 3 or 4 years’
Paul Dales, chief UK economist at consultancy Capital Economics, said the base rate could remain above 4 percent throughout next year and then decrease in 2024.
Britons are already facing soaring prices for everyday essentials including energy and food bills.
From the start of October, with the introduction of the Government’s Energy Price Guarantee, average household bills went up to £2,500 a year.
This cap will be in place until April next year, when average bills will increase to £3,000. The cap is based on unit price so bigger households face even larger bills.
Without the Government cap, prices would be capped in line with the figure set by energy regulator Ofgem.
The regulator set its cap for the first three months of next year at 67p per kilowatt hour for electricity and 17p per kilowatt hour for gas, which would have meant the typical household bill rising to £4,279 a year.
Rachel Springall, finance expert at comparison site moneyfacts.co.uk, told Express.co.uk the interest rates increase may not necessarily mean good news for savers.
She warned: “There is no guarantee savers will see a base rate rise passed onto them, unless they have this linked to their savings account – such as a tracker deal.
READ MORE: Cold Weather Payment could provide £25 as temperatures drop below zero
“If savers feel they are not being rewarded for their loyalty on an easy access account then they would be wise to compare other deals and switch, particularly as challenger banks and building societies are currently offering some of the top rates.”
Express.co.uk asked Ms Springall whether savers can get a better rate by putting their money in a flexible rate savings account, which may increase as the interest rate continues to surge, rather than opting for a fixed rate account, where the interest rate remains the same for the duration of the account’s term.
She said an easy access account would be a “suitable savings vehicle” for savers who want the flexibility to move their money around so they can get the best deal.
The savings expert said it’s very unlikely that savers will be able to get a better rate with a flexible savings account than committing to a fixed rate.
She commented: “It is highly unlikely that savings providers would offer a higher rate on a flexible savings account compared to a fixed account, because savers could remove their funds whenever they want.
“But with a fixed bond, providers have a good idea how long a balance will be held as many do not allow early access during the term.”
The analysts also encouraged savers with funds in a variable rate account to review their savings regularly to check if the interest rate has changed.
She said: “Fixed rate bonds are typically invested in at the start of the term and then left for the duration, however, some can allow additional investments whilst the issue remains open.
“An account that pays a fixed rate is guaranteed, but an account that pays a variable rate could go up or down, so the latter does need to be reviewed every few months.”