Published: 14/08/2022 By Hannah McCormackOn 4th August The Bank of England announced its decision to raise UK interest rates by 0.5% to 1.75%. This is the biggest interest rise since 1995 with many now predicting we will slip into a recession in the next few months.
But why the increase?The Bank of England has to keep the rate of inflation to 2%, with the current rapid increase of prices the rate of interest has to be put up in order to try and bring down the rate of inflation. It has been predicted by The Bank of England that inflation could pass 13% later this year.
Why is inflation so high?Since the pandemic demand for products has increased but the availability of these products has decreased therefore forcing firms to raise their prices. That coupled in with the increase in energy prices as well as gas prices which have doubled since May, all adds to why inflation is continuing to rise.
How will this affect me?If you have a variable rate or tracker mortgage you will see your payments rise, this will not affect you if you are on a fixed rate mortgage unless your fixed rate is coming to an end. If you have a credit card, bank or car loan your lender could decide to increase your rate.
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