01656 652199
Bank of England Raises Base Interest Rate
August 7th, 2018 | News | By Tim Mogford
What’s happened?
Last week, The Bank of England raised its base interest rate from 0.5% to 0.75%. This was only the second rise since 2009.
The nine members of the Monetary Policy Committee voted 9-0 in favour of a rate hike as the fears of a post-Brexit economic downturn begin to grow.
By increasing the interest rate now, it gives The Bank of England more room to manoeuvre should we need an emergency Brexit related cut next year when Britain officially leaves the EU on 29th March 2019.
What does it mean for my savings?
Theoretically, good for cash savers but rising prices mean a level of inflation which is outstripping the returns on savings, leading to reduced household purchasing power.
The banks ought to be passing on the 0.25% increase to the consumer – although this scarcely happens straight away.
What does it mean for my mortgage?
Those on Standard Variable Rate (SVR) mortgages will most likely see their rate go up and those on Tracker Rate mortgages will definitely see their interest rate increase by 0.25% – increasing their monthly repayments. Although this is not a significant increase, it may be a sign of things to come.
Research by London & Country has also shown more than ⅓ of U.K. households with a mortgage are on their providers SVR. An example of the first bank to increase their SVR:
Barclays – 4.99% increased to 5.24%*
There are fixed rate mortgages available on the open market offering significantly better value than the current SVRs. It is not uncommon to see fixed rate mortgage products with an interest rate of around 1.9% ranging to 2.3%.
What should I do?
MoneyAge.co.uk state the following “Those borrowers who are on SVR should contact their mortgage broker for whole of market advice, as this rate rise could make certain customer segments more vulnerable. They should take professional advice about their options.”
Even if you are not on a SVR or do not have a mortgage in general, get in touch to discuss the interest rate increase and how it could affect you.
