After 10 years the bank of England have increased the bank base rate. Why? They feel that inflation is a little higher than they would like but it has been like this in the past and they haven’t increased rates, so why now? They are projecting that inflation will continue to rise, currently at 3% when their target is 2%.
Inflation reflects the amount of ‘bang for your buck’, it is defined as a sustained increase in the general level of prices for goods and services, and is measured as an annual percentage change. Under conditions of inflation, the prices of things rise over time. So the things we buy every day are getting more expensive.
Richard Carter – Head of Fixed Interest Research at Quilter Cheviot “Markets were expecting the move and actually the tone of the statement was fairly dovish, leading to an immediate drop in Sterling, lower gilt yields and a rally in the FTSE 100. We will of course pay close attention to the impact this rate increase has on consumer and business behaviour in the UK. However, we doubt that stock markets will be unduly troubled by the Bank of England’s move, especially given the strength of both the global economy and corporate profitability.”
What should you do next?
Get in touch with your savings or mortgage provider and check what rates are going to apply to you! If your mortgage is on a fixed rate, you won’t see a change in your payments right now, however if you are on a tracker, discount or standard variable rate then you are likely to see an increase. Lenders will write to all their customers with notification, however we recommend you take action and contact them directly.
There is speculation that the bank of England will increase interest rates again, although very slowly and surely, they do not want to stop consumers from spending. Therefore if you are wanting to secure a good fixed rate on your mortgage, this could be a good time to do so! We have seen some banks already withdraw their range of products and put increases in place in the speculation that interest rates will be increased.
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