Interest Rate Shock: Bank of England Raises Rates to 5%
- Bank of England raises interest rates by 0.5%, surprising economists and markets.
- The aim is to control inflation, which has remained high at around 8.7%.
- Savers should review their accounts for better rates, as banks may not pass on the increased interest.
- Variable rate and tracker mortgage holders will feel the impact immediately, while fixed-rate mortgage holders will face higher rates when their fixed term ends.
- Seek advice from a mortgage broker and explore available options to secure the best deal. Consider contacting debt charities if struggling with mortgage repayments.
In a recent YouTube video, financial guru Andy Clever Cash breaks down the implications of the Bank of England's surprising decision to increase the base interest rate by 0.5%. This is the 13th consecutive rate increase, bringing the base rate to 5% from the previous 4.5%. The increase is larger than anticipated and has left many economists and markets stunned.
Andy explains that the decision to raise interest rates is primarily driven by the need to control inflation, which has been persistently high at around 8.7%. The Bank of England hopes that by raising interest rates, people will have less disposable income and spend less, thus slowing down the pace of inflation.
However, he also acknowledges that the rate hike has significant consequences for savings and mortgages. Andy recommends that savers review their current accounts as many banks do not pass on the increased interest rates to customers. He advises savers to look for better rates from competitors such as Principality Building Society offering 4.15% on limited access accounts and Oxbury offering 4.11% on easy access accounts.
When it comes to mortgages, Andy notes that those on variable rate or tracker mortgages will feel the impact immediately, as their monthly repayments will increase. For those with fixed-rate mortgages, the impact will only be felt when their fixed term ends and they have to find a new deal. Andy warns of a potential mortgage "time bomb" as many people will face huge jumps in interest rates when their fixed deals come to an end.
To navigate this uncertain environment, Andy advises homeowners to consult a mortgage broker who can help them explore different options and secure the best deals available. He urges those struggling to afford their mortgage repayments to speak with their mortgage lender to discuss potential solutions or seek advice from debt charities such as StepChange or National Debtline.
Tom Church, Co-Founder of money-saving community LatestDeals.co.uk, offers his advice to consumers, saying, "It's essential for savers to review their accounts and switch to providers offering better rates. And for those with mortgages, it's crucial to seek professional advice and explore all available options. Don't wait for the mortgage time bomb to explode; take action now. Andy's advice is invaluable - subscribe!"
For more in-depth information and a comprehensive list of the best savings rates, visit Be Clever with your cash.
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