The Bank of England (BoE) raised their base interest rate to 3%. Less than one year ago, the rate was 0.1%. The BoE aims to keep inflation (the rate at which prices increase) at 2%. However, inflation has been above 2% for over a year. Therefore, the BoE increases the interest rate to influence inflation. It is believed that interest rates could be 4.75% by next year.
By increasing the base rate, the cost of borrowing would also increase, which leads to a reduction in the demand for it from consumers, households, and business. As a result, this slows down the economy and allows things to settle.
Furthermore, a higher base rate also impacts mortgages. For instance, those on variable rate tracker mortgages would expect to see an immediate impact on mortgage repayments.
Here are 3 ways it could impact you:
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