How Will Interest Rates Affect You?

After last month's rate rise by the Bank of England (BoE), investors and variable rate loan holders will likely not receive any notice of a change this week so soon after the first rise in a decade last month.

The BoE increased rates to 0.5% in order to curb rising inflation, however, as the outlook on the economy remains relatively downbeat, further moves are not expected in the short term.

Indications from the BoE are that there will be two more rate increases over the next three years as the UK economy is runing below the bank's 2% target for inflation, however, some economists expect rates to remain at 0.5% for the next year or so.

The fact that mortgage rates have remained relatively steady since the November hike is another indicator that a rate hike is unlikely (Alex Wright & Simon Lambert, This is Money, December 2017).

Lenders already raised rates in anticipation of the rate rise in November, lending evidence to the "no change" camp.

Some banks & building societies have raised rates since the November hike, with smaller banks and building societies being the most likely to do so.

Mixed reports on the UK economy have complicated the picture further, with an increase in manufacturing activity contrasting with a decrease in service sector growth, the service sector which has contributed the most to the UK's GDP in the modern era.

Service sector firms are facing higher costs, which has led to an increase in the prices they charge for their services, the most in a decade, giving impetus to the expectation that inflation may well continue to rise.In addition, consumer spending has been hit by a combination of rising prices and weak wage growth.

The above factors have lead to a situation in which the pressure on the BoE to raise rates could become irresistible.

If the current low rates have sparked the search for a new mortgage for you, contact Westminster Wealth Management today. Our team of mortgage advisers can ensure that you will receive the best possible deal on your new mortgage or re-mortgage.

Your home may be repossessed if you do not keep up repayments on your mortgage.

Our charges are usually between £395 and £995 depending on the type and amount of borrowing required and individual circumstances.