It’s been something that many people have been predicting for some time, but the governor of the Bank of England announced on Tuesday that there will be no rise in interest rates just yet, even though he predicted that it should be expected at the beginning of 2016 just six months ago.
As professional advisors, in all aspects of financial planning we know that there will be many people wondering how this will affect them financially, especially if they have savings or mortgages dependent on the interest rate.
How the Base Rate Affects Mortgages
The money that you pay back on your mortgage repayments is heavily dependent on the base interest rates set out by the Bank of England as it will determine the cost of borrowing money from your bank.
Should the interest rate rise, depending on the type of mortgage repayment procedure you have in place, you could see an increase in the amount of money you have to pay back in interest over each month, sometimes mounting up to quite a big amount over the course of a year.
This stalling of an interest rate increase is welcomed by many people who have mortgage repayments still outstanding. This means that their repayments will stay consistent in the amount that they have to pay back each month; for now at least.
Why Has It Been Put Back?
The decision to withhold increasing the interest rate was made by the governor of the Bank of England, Mike Carney after reports highlighted that the UK’s economic state hasn’t progressed as much as it was hoped.
Mr Carney has stated that his predictions of a rise have been quickly overturned, due to the volatile economy of the UK. He said “Last summer I said that a decision as to when to start raising Bank rate would likely come into sharper relief around the turn of the year,”
“Well, the year has turned and, in my view, the decision proved straightforward – now is not the time to raise interest rates.”
Even the EU is struggling with the eurozone interest rates, claiming today that they will also be remaining low for a longer period of time.
Interest rates are currently standing at a measly 0.5%- falling extremely close to the zero percent inflation mark which is worrying many people.
Although this is great news for those with interest dependent mortgage repayments, it’s important to realise that this rate isn’t going to stay put at 0.5% forever. Managing your finances adequately and making use of interest earned off savings is still extremely important.
If you’d like some help with your financial situation or even pension planning in Lancaster and don’t know where to turn, don’t hesitate to get in touch with our expert financial advisors here at Burton and Fisher. Call our team today on 01524 416872 or head over to our Facebook, Twitter and LinkedIn pages for more information.