Interest Rates are now the Highest They’ve Been in 13 Years
Interest rates in the UK are now the highest they have been in 13 years. Inflation is set to hit 10% this year. The MPC voted in favour of the rise, winning by three votes. The Bank of England have raised the rates in an attempt to tackle the steep rise in the cost of living, which is currently gripping the UK. The rate has not been this high since the financial crisis that took place in 2009. Those who opposed the measures wanted a bigger increase to 1.25%. This is the fourth time that the committee have voted for an interest rate hike and the UK is currently struggling with soaring inflation that largely comes down to rising energy costs.
It is a concern that the UK is going to go into reverse growth, with inflation peaking at 10% as the Ukraine war adds to the crippling costs of the living crisis. Mortgage borrowers are set to feel the squeeze and many people believe that the Bank of England are walking a fine line, as it is a balancing act between cooling inflation and trying to narrowly avoid a recession.
Paul Johnson, who works for the Institute of Fiscal Studies, has released a statement warning people about their mortgages and the hike in interest rates. He said that right now, interest rates are still staggeringly low. If you look at it as being a quarter of a percent, or even half a percent, you will soon see that this is in fact a very low level and that it isn’t as dramatic as it looks. The director also went on to say that if you have a mortgage and it goes up by 1% then this is a huge increase. This could mean a double in your interest payments over a set period of time, so a small change now could end up having a monumental impact in the future.
When people’s fixed rates run out, this could have a huge impact on those who have very large mortgages.
