The rate rise cometh - so now what?!
11 July, 2017
The Bank of England today hiked interest rates to 0.75% - so what?
The headlines will scream that this is highest they have been for nearly 10 years. It seems incredible now that in the 1980s, interest rates skidded about between 8% and 16%. Ouch!
So, here’s what will actually happen.
Mortgages get a touch dearer.
About one-third of Londoners are on variable mortgages which will see the average repayments in the capital go up by about £300 a year. If you’re not on a fix, take this as a nudge to have a look at your deal. Money Supermarket (https://www.moneysupermarket.com/mortgages/) is a good place to compare mortgages and most providers will have switching deals, offering cashback or temporary rate reductions.
Savings rates get a touch better.
If you’re a saver, it could be slightly better news although NB: there is no obligation for your bank to increase interest rates to you. So as always – shop around! As at today, the best deal we could find on a 1 year fixed rate is Atom Bank at 2.05% per annum (https://www.atombank.co.uk/fixed-saver).
The pound should, theoretically, get stronger.
As the UK becomes more appealing for global lenders choosing a good home for their savings. If they save here, they need to convert to pounds, i.e. buy more of them. This extra demand boosts the value of sterling. Which in turn will make any summer hols abroad a little bit cheaper. And about time too.
But is it old news?
Trouble is, this rate rise has been on the cards for a while. So, if everyone was already expecting it, it might already be ‘priced in’ to the way people around the world have been buying pounds and deciding how much they should borrow. So it’s reasonable to expect the reaction to be a bit ‘mwah’.
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