Interest Rate Gone Up By 0.5% To 1.75% - Biggest Jump In 27 Years
In the News
The Bank of England has just increased interest rates as expected but they have gone up 0.5% instead of the usual 0.25% making this the biggest jump in 27 years and taking the interest rate to 1.75%
People on tracker and variable rate mortgages will see their payments rise from next month. They have increased the rate in another attempt to slow the rate of UK inflation which is tipped to pass an eye watering 13% later on this year.
The typical tracker mortgage will rise and extra £52 per month and a typical variable rate will increase around £59 per month. This obviously depends on how much you have left etc but these are the average increases. Credit card, loans and car loan payments could also increase if you are not on a fixed rate too.
Will this affect you? I just worry how much more cloth we can cut and how much more money we can somehow find to pay for our basics with mortgages, food, fuel and energy price rises.
Personally, I don't like being in debt, but other folks have no choice and it racks up if they don't pay in full. This is a horrible path.
I wish Lizz Truss (supposedly the next PM) would do something about the mess that's coming though I doubt it.
Unfortunately inflation is a worldwide phenomenon . So no intelligent person can say "it's the governments fault " or even that the "government has to fix it " .
The government has no money of it's own ( it's our personal and company taxes that they have to "spend " or of course borrow on our behalf ) .
A windfall tax has already been applied to energy firms and I can see this being broadened , but will provide a drop in the ocean relative to how vulnerable members of our society need help .
When energy prices rise it hits everything not just our individual budgets in fuel and energy bills . Factories , shops ,offices all use vast amounts of energy . Lorries that move our food to the local shops use bucketloads of ever more expensive fuel that has to be paid for (by higher prices to the consumer ) . Wages are also rising which in effect "bakes in " more inflation as these higher wages have to be paid for , again by raising prices .
In my opinion raising rates to curb inflation is a very blunt instrument with many unintended consequences . The theory being if many folks lose say £200 a month of "spending power" each month due to higher mortgage and credit card payments then demand will drop hence inflation will eventually fall . Although I get it that some people will just keep on spending until their debt is unsustainable .
It's not a solution but I would think that demand has already slowed due to higher food , energy and fuel costs massively hitting our personal budgets ? Most Households , I presume, have already cut their spend due to current inflation .
Don't forget either that small and medium size companies will also have to pay these higher interest rates . Thus may not be able to replace transport , open new factories or shops or hire new workers .
Plenty of food for thought - but no use any of us playing the Ostrich and blaming whoever . The only light at the end of the tunnel is that inflation should peak in the next 6 - 8 months and possibly at that stage interest rates may have to fall drastically to get the economy going again .
Interest rates should be more like 5 percent as a standard without current inflation, these are still low rates. I imagine Savers will be a little happier and people down the line when they pay less for a house will benefit. Not great news for the people that have bought overpriced houses under the impression that rates would not increase.
I really hope it doesn't get as bad as is being predicted but I have very little faith in our government being capable of managing the situation.
Midnightflower sadly you are right. The one thing that's becoming very clear is that the two contenders don't have a clue what they are going to do, other than that they will do things very different to the last administration - while quietly hoping we don't remember that they were part of it.
Midnightflower Managing the situation is the best they can hope to do , as inflation is beyond any governments control when it is externally generated . Hope that any extra help is targeted at those who are vulnerable through no fault of their own .
didbygraham Sounds like someone has a bright idea on how to fix the problem ? Please let us all know 
. Or is it just another tedious uninformed blame game ?
Midnightflower it probably will and people who have faith in this government must be wired up wrong.
Golfforall Well I watch the news and listen to the debates and read a lot into the candidates so yes I am reasonably well informed. Both sides are attacking each other. Both sides are trying their best to pretend they have the answer and that they were not part of the problem. Inflation due in part to external factors - is a problem all around the world - but its clearly hitting us harder than others.
We are on a fixed rate mortgage and our old fixed rate expired 2 days before the increase. We got our new fixed rate just in time, we are lucky as our mortgage payment has only gone up by £8 a month.
I have been paying 2.98% since mine started in 2007 and only recently realised.......gutted
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