How will interest rate rises affect your finances?
The Governor of the Bank of England, Mark Carney, has hinted that the Bank of England base interest rate will soon rise. Many financial experts believe that this will happen in November 2017, and expect it to take the rate from 0.25% to 0.5%.
Interest rates have been kept low to stimulate the economy, but present low unemployment and high inflation rates have presented an argument for increasing the interest. Should this happen, a number of effects are likely.
• Firstly, bonds and savings account rates may marginally improve. If you are a mortgage payer, interest could rise and repayments increase, which may offset some of the gains from higher interest received on savings.
• The markets could respond to an increased interest rate by causing the pound to become stronger. Following the Brexit vote, the pound became weak, but if sterling recovers it could mean purchasing items abroad becomes cheaper.
• Companies that rely on loans may be tempted to pay back more and this could cause them to increase prices to customers. Similarly, banks may be more willing to lend as they stand to make more from larger interest loan deals.
• The government borrows money, and this will cost it more if interest rates rise. This could weaken the economy.
• The past history of interest rate rises shows that they tend to have a minimum effect on share prices on the stock market.
Residents of the Wirral need a personal wealth management plan that safeguards their wealth, no matter how much interest rates rise or fall.
