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Financial Blog

Shock Interest Rate Rise Imminent

Despite leading economists from across the board predicting only weeks ago that the Bank of England wouldn’t be increasing the base rate until at least 2019, there have been murmurs around a rate rise as soon as November this year.

interest rate riseThe predictions of ‘no rate rise’ was music to the ears of anyone coming to the end of their fixed rate term or looking to buy their first home within the next couple of years.

But now, Mark Carney, the governor of the Bank of England has hinted that because of higher inflation and a pick-up in growth of GBP against the USD that a rate hike could be coming in a matter of months. In an article on the BBC Mark Carney was reported to say “The majority of members of the Monetary Policy Committee, myself included, see that the balancing act is beginning to shift, and that in order to… return inflation to that 2% target in a sustainable manner, there may need to be some adjustment of interest rates in the coming months”.

“Now, we’ll take that decision based on the data. But yes, that possibility has definitely increased.”

The base rate, which is what mortgage providers base their product interest rates around, has been at record lows since August 2016. The current base rate is just 0.25%.

What this means for you is that if you’ve been placed on your mortgage lenders variable tariff after your fixed rate expired, or if you are coming to the end of your fixed rate mortgage then you should act quickly to secure a fixed rate now. While rates remain low you can fix your payments and benefit from some huge savings. Equally, as a first-time buyer, you can secure a fixed rate mortgage for a lower price if you manage to complete before the base rate increases.

For expert help and advice in securing the best deal for your circumstance and taking advantage of these low rates then contact a member of our friendly team on 01273 736536 or fill out the contact form for a callback.

Higher inflation and a pickup in growth could lead to a rate hike in “the coming months”.


Elsewhere, inflation in the UK remains above target according to a report by the BBC. In July, inflation remained at 2.6% which is well above the Bank Of England’s official target rate of 2%.

Higher interest rates curb inflation. So, with the inflation rate sitting pretty at 0.6% above the Bank of England’s target it would have been no great surprise to see a rate increase, in an attempt to slow inflation.

There are a few ways higher interest rates curb inflation and the reason is that it has an effect on consumer spending. If interest rates rise then borrowing becomes more expensive. This means consumers have less to spend.

Mortgage costs rise which mean people have less disposable income

And, higher interest rates encourage saving opposed to spending.

All of these factors contribute to a reduction in inflation.

Despite experts from the likes of Barclays, Morgan and Stanley and Oxford Economics all echoing the same thing about rate rises being on hold until 2019. There are some who disagree.

Michael Lee at Cambridge Econometrics is one who expects a rise in the second or third quarter of 2018 as the bank tries to curb inflation which he believes will remain above target for the next two or three years. A representative from Nomura even predicts a rate rise as soon as November of this year.

In reality, no one knows for certain, but if you would like to take advantage of the low-interest rates while they are available and remortgage or buy your first home then talk to a friendly member of our team who can help you find the best deal for your circumstance and do a lot of the legwork for you.

For expert advice on securing a mortgage that’s the best for you please contact us for advice. Tel. 01273 736536

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