When will interest rates rise?

Find out the latest on UK interest rates

This month interest rates were placed on hold again, which is good news for borrowers but not so good for those with savings. The interest on savings is very much aligned with the Bank of England’s base rate. Interest rates hit an all-time low in March 2009 and it has been stuck at that rate of 0.5 ever since.

Back in July 2008, the base rate was a healthy five per cent but this fell dramatically to 0.5 per cent by March 2009 after the Monetary Policy Committee carried out several cuts in an attempt to help the faltering economy.

Many people feel that as a result, lenders are fleecing savers who are tempted in with a good rate, which is slashed once you’ve stopped paying attention. Therefore it is worth getting advice on where to invest your money.

Last year it was predicted that rates would rise early 2016 for the first time, with a rise in mid 2015 looking most likely. But these predictions are now fading as the economic recovery gathered momentum and speculation moved to a rise just before the General Election.

Mark Carney, the Bank of England governor, surprised the city by stating his surprise that there was speculation of a 2015 rise, leading people to think that the rise would actually come this year at some point. However, he has suggested however that any rises will be slow, with a 2.5 per cent bank rate in three years’ time.

So, will rates really rise this year? The reason that Mr Carney would want rates to rise isn’t to cool economic recovery, but to see higher borrowing to cool the demand for assets such as property.

There will be some signs if rates are about to rise. For example if there are any changes in the fortunes of our economy here in the UK, or any knock on effects from major changes in Europe.

There are fears the recovery of our economy isn’t a full gone conclusion, with concerns that the sterling’s rise may dent manufacturers’ prospects. Official figures showed Britain’s trade in goods deficit with the rest of the world – with a widening difference between exports and imports which went from £8.8billion £9.2billion in a month.

In the May Inflation report, the Bank of England stated that it is in no rush to raise interest rates, comparing economic recovery to qualifying for the World Cup, saying our economy now needed to win it. The report indicated that there was no plan for an early rate rise to cool the property market.

If you are concerned about interest rates and want to know what we think about the British economy in the forthcoming year contact us for an informal chat and advice on how best to manage your finances.


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