Interest Rate Rise – What does it mean for me?
The Bank of England (BoE) is the UK’s equivalent of the Federal Reserve System in the USA – they are our central bank and act as the government’s bank and the lender of last resort. It issues currency too, but most importantly is oversees monetary policy. This includes setting the base interest rate.
A change in the BoE base rate is always big news, but how will it really affect you? The rate has increased from 0.50% to 0.75%. Practically, this is a rise of 0.25% meaning that if you saved £1,000 in the bank with the new interest rate versus the old one, you would be better off by £2.50 after one year. This may not sound like a huge increase, but the news headlines will grab attention as this is the highest rate since March 2009; the aftermath of the financial crisis.
Any ‘variable’ interest rate linked product will likely increase, whether this is a mortgage becoming more expensive or a savings account generating more interest. Savers will therefore benefit but people with mortgages may see higher costs.
It can be seen as a positive move by the BoE, implying that the UK economy is in a good positon; increasing interest rates often means people save more and spend less, although a rise of 0.25% may not have such a dramatic swing.
If you have cash in savings accounts which has benefited from this increase, this is a positive albeit minimal. Should you wish to talk to someone about making this cash work harder and generate potentially higher returns through investment markets, get in touch with an adviser today.