Interest rates: Bank of England expected to increase base rate to 0.75%
The Bank of England is to make a decision today regarding increasing interest rates from 0.5% to 0.75%. The change would follow a similar rise in November 2017 when the Monetary Policy Committee raised rates from 0.25%.
Any increase would take the Bank Rate to its highest level since the financial crisis adjustment in 2009.
A rise predicted later than expected by some of the countries leading economists is due to weak economic data from the first quarter of 2018. During that period the UK economy expanded by 0.2% with reasons including uncertainty over Brexit and freezing winter temperatures caused by the “Beast from the East”.
The International Monetary fund has stated that Brexit uncertainty has had a negative effect on the UK economy. Before the referendum in 2016, the United Kingdom was top of the global growth league against its main industrial competitors.
Following the decision to leave the UK is languishing near the bottom.
Regarding the effects of bad weather on the economy, economists seem to be divided. The construction sector was down sharply with estimates of 30 days being lost on building sites due to freezing conditions.
The bad weather also appears to have affected fuel sales and high street shopping.
However, the Office for National Statistics claims the bad weather impact was “generally small” on the economy with some sectors – such as the energy sector – showing growth due to demand being up because of the cold weather conditions.
Today’s decision expects to see the Bank of England governor, Mark Carney, stress that “the August hike is a slow and steady step on the MPC’s path to normalisation”. This follows the Bank’s chief economist Andy Haldane, along with two other of the nine policymakers voting for rates to increase to 0.75%. Any vote requires five votes (a majority) to change policy and instigate the rise.
For those on an SVR (standard variable rate), the rate would likely increase by 0.25%, but the percentage will vary according to the lender. Anyone on a tracker mortgage will see the rate automatically increase by 0.25%.
Regarding cost, this means a variable mortgage of £150,000 an increase to 0.75% is likely to increase the annual cost by around £224. More than 3.5 million residential mortgage are on a variable or tracker rate.
For homeowners locked into a fixed interest rate deal, the increase will not affect monthly payments due to the nature of the arrangement.
Whether you are moving house, are a first-time buyer or are in the process of remortgaging, Hoocht can advise on the best way forward. Our online application takes as little as 15 minutes to complete with mortgage experts on hand to offer free advice.
Although interest rates are still historically low, further increases are expected in the next 18 months and now is the ideal time to re-evaluate your current position and lock in low monthly repayments for up to five years.
If you are a first time buyer or applying for a new mortage we can offer free advice through our new mortgage application process.
If you are remortgaging please follow this link to our intelligent fast rack remortgage application.
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