Monday, January 27, 2014

Are Interest rates Going Up?

With the rate of unemployment in the UK suddenly dropping to 7.1% then there are rumours that the interest rates will soon go up as it was said that the 7% mark would be the time that they would be moved up. However, it could just be panic for no reason as this has now been said not to be the only factor and it has been announced that the economy has a long way to go until recovery starts.

People with savings are desperate to get a better return on their money and those with mortgages do not want to see rates rising at all. However, when rates do go up, it is likely that it will be a slow process with rates only going up a little at a time. It is not as if they will suddenly go up by 5% and cause savers to delight and home owners to despair. however, a raise of .5% will double the current rate and so this could double interest on tracker mortgages and it may even double interest on savings accounts, although it usually takes a long time before these change.

It is therefore wise to be cautious if you have a mortgage but do no start celebrating too soon if you have savings.

1 comment:

Richard Ford said...

The BoE seems to be back peddling on the 7% guidance and reminding us all that rates were not to be raised before unemployment hit 7%. It was not a promise to act at this level.

Inflation is low, wages not rising much and a great deal of part time working in the economy. This- and politics all point to no immediate change.

On the other hand we have the risk of a second financial meltdown- but politics usually beats economics. I hope for a rise soon but do not hold my breath.

NB. I have linked to your excellent blog.