How high could UK interest rates go?
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UK interest rates: How will the rise affect you and how high could it go?
Following the easing of restrictions with Corona Virus, Interest rates have rose sharply as the Bank of England continues to use its powers to tackle inflation. This time last year the base rate was 0.10%, whereas on 3rd November 2022 this was increased to 3%! The 8th consecutive increase since December 2021 and the highest level for 14 years (the year of the financial crisis).
How high could interest rates go?
Financial analysts suggest rates could reach up to 4.75% next year. This has lowered following the resignation of Liz Truss and the reverse in most of the decisions made in the original mini budget in September 2022.
The Bank's monetary policy committee meets eight times a year to decide interest rates. It is under pressure to continue increasing interest rates as a way to tackle inflation and keep it at the target of 2% (inflation is currently running at 10.1%).
How interest rates could affect you?
According to the government English Housing Survey, under a third of householders have a mortgage. Following a period of ultra-low mortgage rates, homeowners are now facing the possibility of much more expensive monthly repayments.
When rates increase, those on tracker and variable rates will see their monthly payments increase straight away. The most recent increase (from 2.25% to 3.00%) will see those on tracker mortgages pay £73.50 more a month and those on a variable rate increase by £46 a month. Those on a fixed rate mortgage will not see their payments change immediately, but house buyers or those looking to remortgage will see a significant increase.
Banks and building societies are currently offering the best interest rates that savers have seen for years. However, the return you will receive from these accounts is still not keeping up with inflation, meaning the value of your cash savings is falling in real terms.
If you wish to discuss your mortgage or savings in more detail, please do not hesitate to get in touch.