In case you missed it, interest rates doubled earlier this month to their second lowest ever level… what a sentence. Expected for some time, this is the first of several ‘baby steps’ Governor Carney has been preparing us for, as The Bank of England seeks to balance spending, inflation and GDP growth.
Commentators do not expect a further interest rate rise this year or even early in 2018, with long term guidance suggesting a rate of 1.5% not happening much before mid-2020. But even still, for tens of thousands of homeowners, this will be the first interest rate rise they have ever experienced and the bank will be watching carefully to see what impact this has on spending and savings over the coming months. At just half-of-one-percent, the rise is unlikely to do much for investors or savers who have struggled to achieve more than 2% AER on the high street for several years, but the move to increase rates will gradually start to lure money back into deposits and away from a spending bubble.
Rather unsurprisingly, banks and building societies were quick to respond, pushing up all their lending rates, even loan rates which, despite the long term historic low base rate, have remained stubbornly high around the 6% mark throughout.