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The Bank of England’s monetary policy committee appears almost certain to raise interest rates this week

The Bank of England’s monetary policy committee appears almost certain to raise interest rates this weekYUI MOK PA

With the rate hike today, we'll see loans get costlier.

Any increase on Thursday would follow a similar rise in November 2017, when the MPC raised rates from a record low of 0.25%.

The Bank of England indicates that although interest rates are now on the rise, they are highly unlikely to hit pre-crisis levels of above 5% for the foreseeable future.

"There was a lot to do about the equilibrium interest rate".

Many had expected a hike in May, but weaker than expected data stopped the committee from doing so.

The MPC baulked at a rate rise earlier this year after the economy dipped as a result of the extreme winter weather caused by the "beast from the east".

While savers may be hoping for better returns, Bank of England statistics show that the average interest rate on United Kingdom current accounts increased by only 0.09% in the seven months since rates were increased by 0.25% past year. Bank staff believe this weakness was temporary and expect the economy to expand by 0.4% in the second quarter.

"The market is now expecting an 8-1 split in favour of a hike, with Sir Jon Cunliffe the only member expected to dissent and vote against a hike", she wrote. "These numbers clearly indicate that the markets are now recovering from the shocks of structural changes and policy reforms".

Economists polled by Reuters had mostly expected a 7-2 vote in favour of a hike.

I'm a saver or a borrower - what does it mean for me?

"Fuelled by intense competition from newer banks, the fixed rate bond market has notably improved since the last base rate rise in November".

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"Regardless of whether their rate increases or not, savers should use this latest rise to assess their options and ensure that, at the very least, their account pays more than base rate".

In reality, however, it's not so simple. "They'll fit one more in before he leaves, probably in May next year, at which point we should have some clarity over Brexit".

The hike will make United Kingdom mortgages and loans more expensive, but should boost returns on cash tucked away in domestic savings accounts.

Around two thirds of its mortgage customers are now on fixed-rate products and so will not see their rate change during their fixed-rate period.

The Pound-to-Euro exchange rate was quoted at a daily best at 1.1291 in the initial kick higher, but is back down to 1.1236 at the time of writing. Nearly all (96%) of new mortgage loans are offered on a fixed rate, usually for the first two or five years.

In theory, an interest rate rise is good news for savers, who should see a higher return for their investment.

"Steel consumption also accelerated in May", the central bank said in a media release.

Another bullish driver for Sterling is the upgrade to forecasts for inflation and growth contained in the Inflation Report. Growth is hovering at around 0.3% per quarter, inflation is just above 2%, and real wage growth is just about climbing.

Unemployment, at 4.2% in the three months to May, is slightly higher than the 4.1% predicted by the Bank.

"They can expect a rise to their savings, albeit a small one".

Canary Wharf is home to some of the UK's banks, which will be deciding what to do with the rates on the mortgage and savings products in the coming days.

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