Interest rates are on the rise as Britons are warned to expect a “nasty shock” before the end of the year.
A RATE OF INTEREST As markets anticipate a new Bank of England move, a surge could be on the horizon. However, one expert has cautioned that if this happens, Britons may be in for a “nasty shock.”
Following the Bank of England’s decision to decrease its base rate to 0.1 percent in March 2020 – which it has not modified since – interest rates have been incredibly low recently. The markets, on the other hand, now expect the base rate to climb from 0.1 percent to 0.25 percent in December, with a jump to 0.5 percent by March. This could have a substantial influence on a large number of people who may be required to take action.
“After 18 months of rock bottom interest rates, hikes could be waiting around the corner, ready to deliver a rude shock to anyone who has borrowed money,” Sarah Coles, personal finance expert at Hargreaves Lansdown, said.
“We all need to think about what it means for us and take efforts to safeguard our wealth.”
“As a result of a barrage of inflation warnings and suggestions from some of the Bank of England’s rate setters, rate hikes are now priced into the market before the end of the year.
“As a result, it is a good moment to assess your finances and ensure that they are sturdy enough to withstand any changes.”
“However, you shouldn’t expect raises this close to the holidays.” Forecasting future interest rates is notoriously difficult, and both the markets and the Bank of England have previously predicted hikes that never came to pass.
“It must strike a balance between the risk of inflation and the risk of stifling economic development and worsening unemployment.”
“Right now, concerns about inflation and solid employment data are persuading investors that a hike is on the cards.”
“However, poor growth data or warnings of more coronavirus protective measures could tip the scale in the other direction.”
Mortgages have been recognized as the product that would suffer the most if interest rates were to rise.
Those on a standard variable rate (SVR) are likely to see their monthly payments rise as a result of the Bank of England’s reforms, so they may want to look for a fixed rate arrangement before the changes take effect.
Ms. Coles stated that action should be taken “sooner rather than later.”