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The 1% bank rate rise means there has been a tenfold increase in Base Rate since December, with rates at the highest level for 13 years: e.g. March 2009 was the last time we saw a 1% rate rise, which is going to be pretty depressing news for a lot of people.
Someone with £400,000 variable rate mortgage, for example, will pay £612 a year more: Mortgage rates have also risen, but the good news is that you can still save hundreds by switching banks: savers will finally be getting higher rates – just as many cash-in to pay for cost of living rise. But beware the fix: BoE predicts rates will hit 2.5%, which means that anyone who fixes their savings rate will miss out.
Laura Suter, head of personal finance at AJ Bell, comments on th bank rate rise: “The move by the Bank’s ratesetters to increase rates lumps even more pain on households struggling with the cost of living crisis. With inflation at 7% and expected to hit double digits in October, when the energy price cap rises again, it might have seemed like the Bank’s hand was forced. The global nature of the drivers of inflation means that this increase to 1% is very unlikely to beat inflation into a hasty retreat, but what it is certain to do is pile more misery on people already having to rely on debt just to pay their bills.
“Last time rates were at 1% they only sat there for less than a month, before being cut again to 0.5%. Anyone with borrowing will fear that the same will be true this time around, and that the Bank will increase rates again to 1.25% at the next meeting in June. That seems almost inevitable, with the Bank now predicting that rates will hit around 2.5% by this time next year.
“This fourth increase in a row by the bank means that in the space of less than five months we’ve seen rates leap from 0.1% to 1%. And that means anyone with debt has seen a significant increase in their costs.”
We certainly recommend the debt charities to get free help, advice and even emotional support. We particularly recommend, of course, Community Money Advice of whom our founder Jasmine Birtles is a patron.