The Bank of England has raised interest rates from 3.5% to 4%, causing implications for mortgage payers and businesses who are struggling to pay off their loans. The decision was made due to higher than expected wage rises which led to inflationary impacts.The rise marks the 10th consecutive increase in interest rates.
The Bank also revised its predictions for the economy, expecting a shorter and shallower recession with output falling by 1% from peak to trough, compared to the 3% drop predicted in November. The Bank believes that the impact of Brexit on trade is emerging more quickly than previously assumed and will lower productivity.
The increase is expected to affect more than 1.5 million mortgage payers, with an average increase of £3,000 a year in interest payments when they refinance their loans. Households in the rental sector will also be affected, with landlords blaming higher borrowing costs for rising monthly bills.
The Bank of England’s decision to raise interest rates will have a significant impact on the finances of the general public. To reduce the impact, individuals can consider the following actions:
Budgeting: Review your monthly expenses and identify areas where you can cut back on spending. This can help you save more and manage your finances better.
Reducing debt: Try to pay off any high-interest debt, such as credit cards, as quickly as possible. This can help you save money on interest payments in the long run.
Diversifying investments: Consider investing in a mix of stocks, bonds, and other assets to help reduce risk and potentially increase returns.
Refinancing: If you have a mortgage, consider refinancing to a lower interest rate. This can help reduce your monthly mortgage payments and save you money in the long run.
Negotiating bills: If you’re struggling to make ends meet, reach out to your utility providers, internet and phone companies, and see if they offer any hardship or payment plans.
It’s important to seek professional financial advice to determine the best options for your specific financial situation. Additionally, the government may consider policies to mitigate the impact of the interest rate increase on the economy and the general public.
