The bank has recently been under pressure to raise the key interest rate in order to contain rising inflation. The consumer price index for the inflation rate is currently 3.1%, while new forecasts by the Office of Budgetary Responsibility (OBR) last month predicted that the base rate could rise to 3.5% if inflation continued to rise. But for now there is no change. The next decision will be made by the MPC on December 16th.
The base rate fell from 0.25% to 0.1% on March 19, 2020 – a rate it had fallen to on March 11, 2020. Previously, the base rate had been 0.75% since 2018.
How the base rate can affect your finances
The base rate stayed the same today, but if it goes up and down it can affect your finances – here is the key information:
- Many mortgage rates are linked to the base rate and can therefore rise or fall depending on the change in interest rates. If you have a standard adjustable rate mortgage, your interest rate can change with the base rate, and if you have a “tracker” mortgage – which, as the name suggests, tracks the base rate – it definitely will. When you have a fix your interest rate won’t change for the time being, but by the time it ends and you’ve increased the rescheduling rates, they may have gone up.
MoneySavingExpert.com founder Martin Lewis recently urged EVERYONE with a mortgage to check now that their existing business is doing the best they can, and if not, check to see if they can convert to £ 1,000 save. Because if the key rate goes up, the top deals will likely go away. See Martin’s Eight on Mortgage Cost Reduction for complete information.
- For savers, a rate hike is generally good news, while a rate cut is usually bad news. A rate hike should drive best buy rates up on both savings accounts and ISAs. If this happens in the future, you may be able to earn more by giving up and switching. Banks can also raise floating rates, although this is far from guaranteed. Conversely, if the base rate goes down, it means that the interest you earn is likely to go down.