The Bank of England Monetary Policy Committee (MPC) has voted to increase UK interest rates with immediate effect today. The rise of 0.25% takes the base rate to 0.75%. That’s the highest level since 2009 and only the second increase in a decade.
It’s noteworthy that the nine members of the MPC voted unanimously for the increase although business groups such as the Confederation of British Industry (CBI) and Federation of Small Businesses (FSB) have ben critical and judge it as premature in the current febrile economic situation the UK currently faces. Speaking of the decision:
There are a variety of scenarios that can happen with Brexit … but in many of those scenarios interest rates should be at least at these levels and so this decision is consistent with that. In those scenarios where the interest rate should be lower, well then the MPC which meets eight times a year would, I’m confident, take the right decision to adjust interest rates at that time.
– Mark Carney, Governor, Bank of England
Apparently 3.5 million households on variable and tracker mortgages will see an increase in monthly payments, although that will not likely be a huge outgoing. Savers may also enjoy a boost but, again, that won’t be significant for most. And any business loans you have, depending on the terms, may become more expensive too.
The real impact of this rate rise will be psychological rather than practical. Because it’s been such a long time since the base rate has been increased, that in itself will be a cause for reflection. It’s a reminder that interest rates can actually go up. People of a certain vintage will recall the bad, dark days of yesteryear when the rate hit an eye-watering 15%. But many won’t. Now, of course, we are nowhere close to that, but no longer does the rate lie at a historic low with no prospect of increase. Borrowing will likely become more expensive for businesses and individuals as a result.
From a merchant perspective the concern has to be about consumer spending and what people have to spend. The likely outcome of this rate increase will be belt-tightening and increased price sensitivity from British shoppers. That is never good news for retailers of any size. Worries will become more acute if the next meeting of the MPC also votes for an increase.
It’s not just mortgages that go up, rents in the private sector will also go up. Even little sums can make a big difference. Our tenants have been in a long time so we will take it, but another rise we will be putting it up, I know there skint most the time.
I see wages are increasing 2.7per cent , not around here am afraid..
One thing which will not happen is Barclays or RBS passing on any interest savings to us. They will have the mortgage up instantly however.
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