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Effective Interest Rates

On Thursday 2nd November, the Bank of England’s Monetary Policy Committee (MPC) took the decision to raise interest rates to 0.5%. The raise hardly came as a shock, with forecasters across the board heralding the increase. However, it was interesting to observe reactions once the decision had been announced. In general, those on base-rate linked mortgages will be the first to see the rise reflected in their payments but when it comes to interest rates on savings the picture is more mixed, with some financial institutions having already announced savings rate changes and others taking a longer view. Those on fixed rate mortgages shouldn’t see any impact until their current deal expires.

Equally interesting was the press reaction with headlines trumpeting the first rate rise in a decade. Whilst that is true, very few of them also pointed out that the rate only fell to 0.25% in August 2016 so the rise now seen is merely returning us to the rate which applied up to that date from March 2009. The MPC also commented in their announcement that they expect future rises “to be at a gradual pace and to a limited extent”.

If you are looking for pensions or investment advice, or if your situation has changed and you may therefore need to review your existing investments, contact Beckworth by using one of the links on our website.