Will the base interest rate be increased?
May 27, 2010
It was not so long ago that borrowers and homeowners would wait with bated breath on the day of the Monetary Policy Committee meeting each month to see whether the base rate would go up or down, and whether their repayments on their borrowing would be affected. However, for well over a year now the base rate has been at its all time low having reached a rock bottom rate of 0.5 percent in March of last year and having remained there since.
This may have resulted in some people becoming complacent, and whilst they may have been careful with their spending a year ago for fear that the base rate and their repayment might increase they may now have stopped being quite so careful with their money with the thought that the base rate will probably remain at its all time low for at least the remainder of this year.
However, homeowners and borrowers shouldn’t be too confident, as some officials believe that the only way to combat rising inflation levels would be to increase the base interest rate, which could then mean that mortgage and loan repayments increase for many borrowers. Over recent months a number of economists and officials have predicted that the base rate is likely to remain at its all time low over the course of this year, but a recent report has said that the base rate must increase.
The report came from the Organisation for Economic Co-operation and Development, which has stated that inflation has spiralled out of control over recent months and that the only way to keep a lid on inflation would be to increase the base interest rate.
The report claimed that the base rate would need to be increased at least once over the remainder of this year, and that by the end of next year the base rate would need to stand at around 3.5 percent. The level of inflation has been soaring above the target inflation rate of just 2 percent that is set by the government. It is thought that this could be a tough challenge for members of the powerful Monetary Policy Committee, as they will have to perform a real balancing act.
The OECD report stated: ‘The authorities face the challenge of preserving credibility, with headline inflation and some measures of inflation expectations exceeding the targeted rate in the context of extremely expansionary monetary and fiscal policies.’
- Will mortgage interest rates increase in 2011? For nearly two years now homeowners across the UK have enjoyed the relief that has come from the base interest rate standing at its all time low level of 0.5 percent. The base rate was
- What will you choose if you need to remortgage? When choosing a mortgage product it is very important that you go for a mortgage that is going to prove suitable and save you money wherever possible, as your mortgage is a daunting long term
- Most borrowers will receive full 0.25% cut A recent report has predicted that most mortgage payers in the UK will in fact benefit from the full 0.25% base rate cut, despite initial fears that some consumers would never see the cut reflected
- Lower interest rates helping homeowners Recently released figures have shown that the lower interest rates that have been in play for the past nine months are helping many homeowners to cope better in terms of their finances. It appears that
- Personal loan rates have rocketed Over the years many people have taken out personal loans for all sorts of reasons, and until the onset of the global financial crisis many people were able to low rate personal loans with relative
Comments
Got something to say?