For the first time in more than 10 years, the Bank of England has raised interest rates. This is the first increase since July 2007, and the interests are bound to increase twice more over the next three years. Financial analysts have jumped in the conversation debating over who are the winners and losers after the interest rate hike. When you lift interest rates that activates a chain reaction of consequences across the domestic economy. Mortgage holders and credit card holders will be the most affected by the interest rate rise, whereas long-time savers and pension annuity applicants will strike better leads in the long run.
For the 45 million savers in the UK, the rise of the interest rates was welcomed. Theresa May’s spokesman stated that she expects to see higher returns to savers passed on by commercial banks. “Following the rate rise, we would expect to see higher interest rates … passed on to savers. Some banks have already said they will increase rates on their savings products. We would expect others to follow suit,” the spokesman underlined. Savers have been suffering from low interest rates for a long period of time. Bank of England Governor, Mark Carney shares the same views with the Prime Minister and adds “We do expect it base rate rise to be passed on. Banks did pass on the cuts to their depositors, and we would expect competition to push it in the other direction.” For those who are planning to travel abroad soon, the hike is also good news since the rise of the interest rates will put the value of the pound up.
For mortgage holders with a variable rate, the interest rate hike will mean a small increase in their monthly mortgage payments, whereas for those with a fixed mortgage rate the news are not so alarming. Fixed mortgage holders are advised to put their financial plans in order and lock a low fixed mortgage rate if that’s possible. Nevertheless, the property market in London has seen some incredible stability and even a drop in prices in certain boroughs. Access key advice on buying property in London here.
Mark Carney has characterized the rate hike as part of a set of “nimble responses to changing conditions”, reflecting on Brexit. Moreover, according to Barney, who talked to the BBC, the Bank expects the UK economy to grow at about 1.7% for the next few years. A prosperity boost from a financial leader, such as the governor of BoE is much need for the UK economy right now since investors have been getting mixed signals from EU and UK leadership over the past months. Lately, another prominent business leader, Michael Bloomberg gave a vote of confidence to London, saying that it will keep rising as a global capital despite the potential changes in EU relations. Learn more about the new Bloomberg HQ here.
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