For the first time in 10 years the Bank of England’s (BoE’s) Monetary Policy Committee (MPC) have taken the decision to increase interest rates to counteract growing inflation.
The BoE’s base rate rose from a record-low of 0.25% to 0.5 % at the start of November and this is likely to have a variety of ramifications for individuals and businesses alike, despite the seemingly negligible change in terms of percentage points.
Small and medium-sized enterprises (SMEs) could face increased cost pressures following this rate rise, particularly those that are already battling surging costs and lack lustre consumer demand.
Millions of individuals across the UK will also be affected by the rate increase. Mortgage holders in particular may be affected by the historic change, particularly those who hold variable rate mortgages – which follow the Bank’s base rate.
Anyone with a variable rate mortgage will inevitably see their monthly payments rise in line with the rate rise, but those who hold fixed rate mortgages will not be immediately affected.
Up-to-date figures suggest that some 4.5 million people in the UK have variable rate or ‘tracker’ mortgages, which follow the BoE’s base rate fluctuations.
According to BBC News, an average household which owes around £89,000 on a variable rate mortgage is likely to see monthly payments increase by approximately £11 to £12 a month.
Meanwhile, hundreds of individuals that owe money on credit cards, overdrafts, personal loans, and car finance will also be affected by the BoE’s decision to hike interest rates. Such individuals potentially face paying as much as £465 million in additional costs as a result of the rise, the BBC has estimated.
Our team will continue to closely monitor inflation and interest rates so that we can provide up to the minute support and advice. If you are concerned about the rate rise and its effect on your existing debts, please contact us.
