What has the interest rate risen to?
The interest rate has risen from 0.75% to 1% to the Bank of England. We haven’t seen an interest rate this high since 2009.
Why have the rates rise?
Due to all the price rises in energy, clothing, and fuel caused by the Russian invasion of Ukraine, we have seen the living cost rising rapidly.
Inflation hit 7% in March, but the Bank of England has said inflation will hit 10% by autumn.
The bank of England has increased prices to try and prevent the rise of inflation prices. This works because people are discouraged from borrowing money which will slow down and reduce the price rises.
Are the interest rates high?
Yes. The interest rates are high if you compare them to 2 years ago when we were in lockdown, the interest rate was 0.1%.
But also, no. If we look back to 2007 before the financial crash, the interest base rate was 5.75%, so it wasn’t abnormal to see mortgage rates of around 7%.
How high could the interest rate rise?
The prediction is the rates are only going to increase. The bank wants to keep a cap on inflation, which means the interest is predicted to rise to 2% by the end of 2022.
What does this affect?
The rise in interest rates will make people think twice about borrowing as it’ll be more expensive.
- An increase in mortgage prices for homeowners
- The predicted rise in interest rates for mortgage holders
- Potential interest rises for cash savers as Bank account interest creeps up