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Interest rates rise to 4.5%
Yesterday, the Bank of England announced another rise to interest rates, from 4.25% to 4.5%. This is the 12th rise in a row, as the bank attempts to tackle inflation. This will have both negative and positive impacts on your money, depending on whether you are a borrower or a saver.
Well, not only will this put even more pressure on people’s finances, but many people will see their disposable incomes decrease as their mortgage payments increase. Similarly, borrowing costs will be higher, meaning loans will cost more to repay.
Alternatively, those with savings will see an increase on the interest paid to them. Although inflation is currently over 10%, meaning any interest under this amount won’t make a huge difference it’ll soften the blow somewhat.
Those on tracker and variable mortgages will likely see an increase in mortgage repayments. According to the BBC, there are more than 1.4 million people on these types of mortgages. Those on a typical tracker mortgage will pay around £24 more per month as the result of the interest rate hikes.
Those on standard variable rate mortgages face a jump of around £15. On top of previous increases, most people will be paying hundreds more per year in repayments. Those on a fixed-rate mortgage with see their payments remain the same until the fixed term ends.
Increases to interest rates may also impact those who have credit cards and loans. This is because the rate of interest on these payments could increase. It is up to the discretion of lenders to put rates up in line with the changes made by the Bank of England.
If you have a savings pot, then good news! Interest rates on your savings could go up. As with loans, it’s up to the banks and building societies as to whether they pass on these increases, but many do. Some banks have been put under pressure to pass on the best rates possible, however a few are still offering low interest.
If you are with a bank or building society that is offering low interest, it could be worth shopping around for the better deal. Make your money work harder with little effort.
The reason interest rates are continuing to rise is due to high inflation. The Bank of England must increase interest rates to lower inflation. However, it seems Britain is struggling to bring down these high inflation levels as quickly as predicted.
However, new projections for inflation were announced by the Monetary Policy Committee, which suggest inflation could fall to 5% by the end of 2023. The target rate of 2% could be met by late next year, should everything move as planned.