The Bank of England raise base rate for second time in a year
Industry News4th August 20180 CommentsLizzy Doherty
The Bank of England have officially announced the second base rate rise in less than a year, bringing the new rate from 0.5% to 0.75%
Though the rise may not seem too substantial, combined with the earlier rise of 0.25%, in November 2017, the increase will see a big impact on savings accounts, loans and mortgages as it finds itself at the highest rate since 2009.
Affecting both savers and borrowers, the announcement is set to shake up finance in the UK, with savers set to benefit, but borrowers suffering.
Those with standard variable rate or tracker mortgages are set to take the biggest hit, with monthly payments becoming more expensive. Fixed rate mortgage borrowers may be safe for now but will most likely experience a rise once their fixed rate term has ended, again resulting in higher monthly payments.
When the base rate rises, saving rates often do the same, dependent on the bank/ building society policy. They have the say on whether they choose to increase in line with the bank rate fully, partially, or not at all! And with the Bank of England reporting that ISA’s didn’t show much change after the November increase, the potential of benefit to savers is somewhat questionable.
it is predicted that the average cash ISA saver with £11,200 could bag £28 more a year in interest, benefiting slightly, but maybe not as much as the saver initially thought.
Of the recent base rate increase and what this means for you, Sedulo Funding Solutions Partner, Leyton Jeffs, Commented:
“Whilst the increase in base rate looks small in only a 25bps rise, it is important to note that the bank rate has trebled in less than a year. This will result in those with more debt suffering the most, meaning the greatest impact is on the most vulnerable. Whether looking at finance or saving, I would always recommend getting independent advice before taking the plunge as often there are more appropriate products in the market attracting better rates.”