By Matilda Jacobs
The Bank of England has announced that for the first time in a decade, interest rates will rise from 0.25% to 0.5%, in a move to curb inflation.
For the 45 million people in the UK with savings, this is a welcome decision. The average easy access savings account pays 0.14% interest, compared to 1% five years ago. Banks including Nationwide and TSB have announced that they are increasing the savings rate in line with this. It is also positive for those buying annuities to finance their retirement.
Yet there is significant concern among homeowners with variable rate mortgages. 9.2 million UK households have a mortgage, and around half of those are on a standard variable rate, meaning payments vary according to the base rate of interest set by the Bank. With estimates suggesting that this could lead to an average monthly increase of £11-12 in repayments, this could be detrimental for many families.
Low income households may be disproportionately affected, as they are likely to have already borrowed money to cover the cost of rising food and fuel prices.
These effects may be exacerbated further given predictions that interest rates will rise twice more over the next three years.
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