Banks boosted by looming BoE interest rate hike 

Strengthening bets on the Bank of England tomorrow hiking interest rates for the fifth meeting in a row boosted the UK’s biggest-listed banks today.

The capital’s premier FTSE 100 index surged 1.2 per cent to 7,273.41 points, while the domestically-focused mid-cap FTSE 250 index, which is more aligned with the health of the UK economy, gained 1.42 per cent to hit 19,315.98 points.

Threadneedle Street is widely anticipated in the City to raise borrowing costs at least 25 basis points to 1.25 per cent, which would take them to the highest level in 13 years, but would still be low by historical standards.

Some traders think governor Andrew Bailey and co will go further and sign off a 50 basis point rise, something the Bank has not done since it was made independent 25 years ago.

Those expectations sent Britain’s largest high street lenders higher.

Britain’s biggest bank HSBC climbed 2.22 per cent, while Barclays added 2.55 per cent

The UK’s largest mortgage lender Lloyds closed 2.21 per cent higher.

Banks benefit from higher interest rates as it allows them to charge more for loans, which widens their net interest margin, a key source of income for the sector.

The FTSE 100 and 250’s gains helped to pare back losses registered at the beginning of the week when the City was ensnared by a global market sell-off triggered by mounting inflation and recession fears.

Retailers led gains on the FTSE 250, with WH Smiths and cult boot maker Dr Martens rising over eight per cent five per cent respectively.