The Bank of England has last week announced a further increase of 0.5%, taking us to with an overall 3.5% base rate.
Previously, we had a 0.75% increase and this time round a 0.5% increase. Although, general consensus is that it may be a potential indicator to suggest that inflation may have reached its peak and that there are progressive steps being taken by the government to stabilise the economy, in the short term this impact the finances of many.
Inflation currently sits at 10.7%, which is lower than the figures announced in the last announcement. Bank of England’s long-term goal is to head back down towards the target 2%, in order to restore the economy to a healthy state. This may also mean that we see further base rate increases potentially up to 4-4.5%, leading up to autumn of 2023.
What does it mean for consumers who have personal financial credit commitments, mortgages and increase in costs for general day-to-day living standards?
Well, coming up to Christmas period where traditionally people spend the most in the whole year, they would now really have to watch their pennies. People are encouraged to save as much as they can, to take precaution in their budgeting and avoid not being able to make payments for current commitments.
For those who have mortgage commitments may be impacted by the 0.5% increase with immediate effect, especially those on Tracker products, which move in line with the Bank of England base rate. Lenders may also decide to adjust their standard variable rate which may also affect consumers.
Doom and gloom aside, since the last Monetary Policy Commitee meeting in the previous month, standard variable rates have decreased to an average of 6%. We can also see many lenders reducing fixed rates from 7% down to around and average of 5.5%. For those who have their fixed mortgage products coming to expiry, we also observe some lenders offering retaining customers fixed interest rate products averaging around 4.5-5%. So, we are seeing some positive progress in banks offering assurance to customers.
A common questioned asked by many, “what do you think happen over the next 3-6 months?”
This is a question that many of us may not have the answer to. However, it is advised and encouraged to all that may be looking to purchase, remortgage or considering switching to an alternate product with their existing lender to reach out to a financial advisor. This way you may be able to get support and advice in constructing the most affordable and feasible plan that will assist you in being best equipped in dealing with any changes to interest rates, prior to our journey in reaching Bank of England target inflation rate. Thus, allowing consumers to confidently spend and manage commitments to cater for their living standards.