How the Bank of England’s interest rate hike will affect you


The Bank of England has raised the base interest rate in a bid to fight inflation (Picture: Alamy)

The bank of englandThe decision to raise interest rates by 0.75 percentage point to 3% last week – the biggest rise in more than 30 years – was a further sign, as if it were needed, that the months to come will be very difficult financially for households. and across the country.

The Monetary Policy Committee (MPC), which sets the base rate, voted 7 to 2 for the increase, with projections for growth, employment and inflation pointing to a very difficult outlook for the economy see you next year and in the first half of 2024.

But beyond the technicalities and MPC announcement jargon, what most of us want to know is simple: what does this mean for my money?

Let’s start with mortgage owners. An increase in the base rate of 0.75 percentage points will be immediately passed on to borrowers with a tracker mortgage.

Meanwhile, borrowers with fixed-rate mortgages won’t see any immediate change in their repayments, but will likely face higher rates when they come to the end of their current contract and need to remortgage. Those who got a 2% fixed rate mortgage a few years ago will now see an average rate of 6.46% for a similar transaction.

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After a huge drop in the number of mortgages on the market following the disastrous mini-budget, the offers come back. But in times of uncertainty, banks will “bundle” their rates tightly, so rates aren’t very competitive right now. Who? rounds the cheapest mortgage rates daily.

And the savers? After years of bottoming yields, this is a group of people who are finally starting to see some benefit from successive base rate hikes. That the banks have rapidly increased mortgage rates and should begin to offer increasingly advantageous savings offers.

The best regular savings accounts and longer duration fixed rate bonds now pay over 5%. It’s still not enough to beat the current rate of inflation, but you should aim for your savings to earn the best rate. Which ? The Money website offers weekly updates on the best savings accounts.

You may be wondering what support will be put in place to help us with rising costs. The government’s Energy Price Guarantee (EPG), which limits the amount you can be charged per unit of gas or electricity, only last six months instead of the previously planned two years. This will be a source of concern for millions of households. Consumers need clarity on what support will be in place after April.

But prices are rising in everything from the cost of the weekly shop to broadband – and consumers will need more support from the companies they work with.

When it comes to shopping at the supermarket, figuring out which products offer the best value shouldn’t be the conundrum it is now. Stores should make their prices, especially unit prices, much clearer and easier to understand.

Where there are areas most in need of healthy, affordable and accessible food ranges, supermarkets should adjust their marketing budgets to ensure these customers are reached.

Broadband providers must improve access to social tariffs, the use of which remains extremely low, and allow customers who find better offers elsewhere during the contract to cancel their offer without incurring penalties.

Free and confidential help

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Debt Advice Foundation: 0800 622 61 51

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