Interest rate doubles: the first increase in over a decade
On 1 November, the Monetary Policy Committee (MPC) voted by a majority of 7-2 to increase interest rates to 0.5%, from 0.25%, the first increase since July 2007. The MPC justified the rate increase with record-low unemployment, rising inflation and stronger global economic growth. Further increases are likely over the next three years, according to Bank of England Governor Mark Carney.
The move reverses the cut in August 2016, which was made in the wake of the Brexit vote.
There will of course be winners and losers, with households with variable rate or tracker mortgages facing higher mortgage interest payments after the rise. Buy to let landlords will see their borrowing costs rise, as the tax relief for mortgage interest is being reduced. The increased costs of borrowing will also add to the pressure on the Chancellor to reduce SDLT rates for first time buyers in his 22 November Budget.
Retailers and other consumer businesses
Will there be some winners? Savers and annuity purchasers may see some better deals: let’s hope the providers pass on the higher rate to savers as quickly as they do for borrowers.
We will be covering this month’s budget on our dedicated budget website page.