The Bank of England is expected to raise its base rate to a 15-year high on Thursday, either by 25 or 50 basis points, to fight inflation and wage growth. The higher cost of borrowing will hurt mortgage holders and could be a downward pressure on house prices. But it would benefit savers who will see higher returns on their deposits.

1. The Big Decision: The Bank of England (BoE) is going to make a decision on Thursday about its base interest rate, which is the rate at which it lends money to other banks. The experts are split on whether they’ll increase it by a little (25 basis points, taking it to 5.25%) or by a bit more (50 basis points, taking it to 5.5%). This would be the highest level in 15 years.
2. Why Increase the Rate?: The main reason the BoE might increase the rate is to fight inflation. Inflation is when prices for everyday things like food and transport go up. The target is 2%, but it’s currently well above that. By raising the interest rate, the BoE hopes to make borrowing more expensive, slow down spending, and cool down the economy, which should reduce inflation.
3. Effects on Mortgage Holders and Savers: If you have a mortgage, an increase in the base rate might mean you’ll have to pay more each month. If you’re saving money in the bank, you might get more interest, as banks might pass on the benefit of the rate hike.
4. Mixed Signals from the Economy: Some signs show that inflation is easing, but the core inflation (excluding unstable items like food and energy) is still strong. Job market is tight, and some worry about the strength of the UK economy. Plus, some think higher mortgage rates are already affecting the housing market.
5. Opinions from Experts: Different analysts have different views. Some think a smaller hike is likely because of easing inflation. Others worry about wage growth and think a bigger hike might be needed.
6. What’s Next?: After Thursday’s decision, there will be three more meetings this year to decide on the interest rate, and the experts are uncertain where it will finally settle. One analyst also warns of potential market volatility around the time of the announcement.
7. Long-term Implications: The decisions the BoE makes about the interest rate over the next two years will be very important for the UK economy’s recovery.

In Layman’s Terms: Think of the interest rate as a thermostat for the economy. If the economy is running too hot with high inflation, the BoE might turn it down by raising the interest rate. This decision impacts us all, from our mortgages to our savings. It’s a delicate balance, and the experts are divided on what the BoE will do next. Thursday’s decision is an important one, and it could have ripple effects for a long time to come.