The Bank of England Raise Interest Rates rise to 0.75%
The Bank of England has today raised interest rates to 0.75% despite a stern warning from the Chancellor, Rishi Sunak, that war in Ukraine is creating ‘significant economic uncertainty’ in Britain.
Members of the nine-strong Monetary Policy Committee voted to increase the base rate from 0.5 per cent to 0.75 per cent in a move which aims to tackle rising inflation.
This is the third rate rise since December and will mean borrowers on a variable rate mortgage will see their repayments go up. Whilst an increase is never good news for borrowers, it should remember that an interest rate of 0.75% is still incredibly low. Those on a fixed rate mortgage will not see their monthly repayments change.
The Bank of England has increased interest rates to try and reduce the rapid rise in inflation in the UK and bring it back under control. Inflation is currently at 30-year high of 5.5 per cent and looks set to hit almost 9 per cent in April. These rates are significantly higher than the Bank of England’s 2 per cent target.
By raising interest rates, the monetary committee hopes to encourage people to spend less, which in turn reduces demand for goods and stops prices spiralling. With food and fuel noticeably more expensive, many households will be wanting to see rising prices settle.
Whilst inflation does need to be curbed, there are new concerns about the wider economic recovery as the war on Ukraine adds in new pressures to an already fragile situation.
The invasion by Russian forces and subsequent sanctions by the West have pushed up the price of oil, gas and wheat as well as other raw materials, and the financial impact on businesses and households will be unavoidable.
The Bank of England is expected to make further rate rises this year, but we are likely to see this done with some level of caution. Raising rates to keep a lid on prices could derail the UK’s economic recovery. With disruption to trade affecting the economy globally, economic advisers will be doing everything they can to avoid the UK entering a recession.
With so much financial uncertainty, all mortgage borrowers should remember the financial rule of thumb which is to have at least three months of their salary in cash savings. Having cash savings to hand is a good way to ride out any rises and falls in borrowing rates and goods prices.
Our team of financial advisers at Furnley House are able to help answer questions you have any questions about your mortgage. To find our more call 0116 269 6311 or email email@example.com.
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All information correct at time of writing.