In an apparent show of economic strength, Bank of England Governor Mark Carney and his team of merry men have raised interest rates from 0.25% to 0.50%......the first interest rate rise for 10 years.
Those at the coalface will feel it the most……the main losers will
be the households with a variable rate mortgage with almost four million
households facing higher mortgage interest payments after the rise. Conversely,
many of the country's 45 million savers should see a ‘modest’ lift in their
returns. Modest being the key word here.
Much has been made of the higher mortgage costs for many, but
consider this……the average outstanding mortgage balance is £89,000 which would
see payments increase by about £12 a month.
This interest rate rise is not the issue……it is the general trend,
direction of movement and dialog coming from the Bank of England that suggest
more rises are on the way over the next 3 years. Not crazy increases but enough
multiples of £12 a month to cause many to look twice. We have a generation of
homeowners who only know low interest rates…….and this is without taking into
consideration the impact on car loans, credit cards, personal loans, et al.
A show of economic strength? Probably not……more a reversal of the
interest rate cut from August 2016, which was widely regarded as unnecessary.
All of this (obviously) comes with the small print of
‘BREXIT’……which is the biggest variable that will cause economic interest rate
policy to go up, down or sideways. In reality, the direction will be decided in
due course…..perhaps. Maybe.
Let’s wait and see.
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