Saturday, 18 November, 2017

Interest rates: rise 'unlikely' to have big effect in Liverpool

The Bank of England today increased interest rates to 0.5 per cent in the first rise for a decade. The new rate reverses a cut made last summer after the EU referendum and still leaves rates at near record lows UK interest rate rises - but what does it all mean?
Juana Turner | 05 November, 2017, 01:57

Those who will feel the biggest, most immediate effects are the millions of homeowners with variable-rate mortgages.

Asked if households - already seeing inflation outpace wage growth - would suffer some "pain" from the rate rise, Mr Broadbent agreed they would.

The Bank of England uses interest rates to try and control inflation, which is now at three per cent and way above any pay increase most working people have seen in a while. "And that is not what the governor said yesterday either". The majority are on fixed rate deals, so they will see no impact - for the time being.

"The increase has no bearing on those borrowers who have fixed rate mortgages, which accounts for the vast majority of customers we have lent to in the last five years since re-entering the market".

The bank's Monetary Policy Committee lifted the benchmark rate from 0.25 percent to 0.5 percent - the first hike since 2007.

The Bank estimated in its Quarterly Inflation Report, released with the announcement on rates, that inflation was likely to peak this month at 3.2%.

"With savings rates with the High Street providers paying as little as 0.01%, it's time for savers to vote with their feet and earn as much interest as they can elsewhere", says Anna Bowes of Savings Champion.

First time buyer Ricky Skinner, 32, from Bristol, is one of the millions who've never experienced a rate rise.

Almost four million households face higher mortgage interest payments following the hike, although Mr Carney stressed the impact would be modest and gradual, with around 60% of borrowers on fixed rate deals.

What's going on? Are banks and building societies ripping us all off?

The average easy access account rate has fallen from 0.45% in December 2016 to just 0.37% today, according to Savings Champion.

He told HuffPost UK: "The hike only returns Bank Rate to the level prevailing before the Brexit vote last year, and, given the uncertainties ahead, rates are only likely to rise gradually and to a limited extent, if at all, in the years ahead".

Richard Beresford, chief executive of the National Federation of Builders, said: "The interest rate rise will give SMEs more leverage when chasing late payments, but there is still some way to go".

The rise in rates will also impact savings accounts, with better deals expected.

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