Rate rise is a real quarter pounder
» 0.25% hike hits borrowers » Savers likely won’t benefit
HOMEOWNERS will take a beating after interest rates went up a quarter of a per cent to 0.75%… with more to come.
The Bank of England yesterday raised the figure by 0.25% to its highest level since March 2009.
Hard-pressed savers are unlikely to have it passed on to them but hundreds of pounds will be added to mortgage repayments for 3.5 million people on variable and tracker rate deals.
Bank governor Mark Carney said more rises were on the cards to tackle inflation, adding: “Rates can be expected to rise gradually. Policy needs to walk, not run, to stand still.” Mr Carney said they were prepared for “a wide range of potential Brexit outcomes”. He added: “We will respond to any persistent change in outlook to bring inflation sustainably back to the 2% target while supporting jobs. “That is how we set policy two years ago... and it is how we will do so in the future.” The base rate was cut to 0.25% in August 2016. When it rose to 0.5% last November, many banks did not put up rates for savers at all.
Interest fell to 0.5% in March 2009 in the credit crunch which was foreshadowed with the collapse Northern Rock in 2007.
The bank said various factors had influenced yesterday’s decision. Confidence in the economy and employment is at 75.6%, the highest since records began in 1971. Wages on average have started to rise faster than prices but inflation is above the target of 2%. Yet economist Ben Brettell said: “Inflation is above the target but not disastrously so. The main argument for raising rates now is to give more room for manoeuvre when the next downturn hits.” John McDonnell, Shadow Chancellor, urged Government to raise incomes. He said: “With the gap between income and outgoings at record levels, the concern must be that rate rises will push more families into higher debt.”