Interest Rates Held At 0.25% Is Great News For Home Owners – due to inflation the Bank of England has decided to hold interest rates at 0.25%.
The Bank is adopting a wait and see stance on interest rates due to the fact that inflation lowered by 0.3% to 2.6% in June of this year.
Of the 8 voters, 6 decided on holding interest rates again, but 2 voted on raising it by 0.5%. The decision to hold rates is due to consumers having less money to spend and a higher rate could cause severe problems for many households.
Representative 277.5% APR - Representative Example: Amount of credit: £750 for 12 months at £119.21 per month. Total repayment of £1430.52. Interest: £680.52. Interest rate: 140% pa (fixed). 277.5% APR Representative.
This already on top of low wage growth and Brexit, the Bank is likely to hold interest rates until the middle of 2018.
Ben Broadbent, deputy governor of the Bank of England, believes that although economy growth and employment rates have been good there are still too many uncertainties for the future of the UK economy.
Economist at Hargreaves Lansdown, Ben Brettell, believes when wages rates rise then it will create an opportunity to raise interest rates. And so due to the fact there is no pay growth currently the decision to hold interest rates at 0.25% has been put in place.
It is predicted however that in February next year the rate will rise to 0.5% and up to 0.75% in August 2019.
Even though there are more job opportunities on the market due to higher inflation it has caused households to have less disposable income. The Bank are now left to decide if this is a temporary situation or a permanent one.
The amount of households in debt has also been on the rise and has caused the Bank to consider putting tougher legislation in place to ensure that borrowers are able to repay their debt no matter what may happen in the future.
It is predicted that when there is a rise in the future to interest rates it will be a slow and gradual change.
The current rate of 0.25% has remained at this level since August last year, and the previous 0.5% being in place for more than 7 years.
The rate was lowered to help encourage consumers to spend more and in turn bring more money back in to the economy.
Although we can not predict when interest rates will rise it is planned to be gradual and is likely to rise when there is a rise in wages.