Bank of England rate jumps to 0.25%

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    «The rise itself is not huge, but the signal is»

    Martin Lewis, Founder of MoneySavingExpert.com, said: «A rate hike was widely announced last month but didn’t materialize. Far less expected this month, with Omicron’s surge and a blow to the economy, far fewer expected, but the bank surprised us.

    “The climb itself isn’t huge, but the signal is. It says a lot that the bank overcomes its inertia. This is the first rate hike in three years – and I suspect (unless we go back into lockdown and the economy goes back down again)) indicates it’s just the beginning, with more to come.

    “The increase is of course being driven by high inflation in the UK. Prices are rising as fast as they have been in years, and the Bank of England’s job is to prevent that from happening. By increasing interest rates, the theory encourages saving and discourages borrowing from getting money out of the economy and slowing things down.

    “The problem is that the price of fuel and energy is what drives inflation. This is a global issue that unilateral UK action is unlikely to fix on the energy price cap regardless of what the Bank of England does, so we’ll have to wait and see if its rate leverage is strong enough to get things going again.

    “In practice, I fear that mortgage holders are likely to lose more than savers will gain. For adjustable rate mortgage holders, the typical increase of £ 8 per month per £ 100,000 mortgage is far from welcome the hikes we see in energy bills and fuels. So it is important, especially for those with the Standard Variable Interest Rate (SVR), where lenders have the option to increase the interest by more than the 0.15% – to see this as an incentive to see if you can save by Get a better mortgage deal.

    «For savers, we might see some easy-access rates go up at the big high street banks, but they’ll still be crap – often less than 0.1%. Chances are that the fixed rates because of the Announcement will rise a little more. » so don’t be in a rush (just don’t forget) but if it does happen it probably won’t be a significant spike in the short term.

    Instead, the impact of the rate hike is trivial to most people compared to switching to the best, easy-to-access accounts on the market at over 0.7%. In fact, it’s a far sweeter choice for most savers right now if you don’t. «When you need the cash for the next year or so, consider putting some cash in a top fixed savings account – where you own it best accounts with easy access get almost twice as much. «



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