Base Interest Rate Set To Stay Low?

Base Interest Rate

The base rate of interest has been kept at the all time low of 0.5% for at least another month.

Good news for variable rate mortgage holders, good news for borrowers. A settled and consistent base rate of interest can provide confidence, however we are increasingly seeing talk of rising interest rates, inflation and economic growth.

So will the interest rate go up?

Following the appointment of Mark Carney to head the Bank of England, we have seen some guidelines as to when the interest rate may rise. These conditions were linked to employment and inflation.

So, these comments from David Tinsley of BNP Paribas could provide some solace to mortgage holders,

“Even on an optimistic basis the UK labour market is not going to deliver an unemployment rate at 7 percent for six to twelve months at the very earliest, while inflationary pressures are under control..”

The 7% figure was quoted as a measure which when met will signal a rise in the interest rate. The thinking is that once we have unemployment below 7% then incomes will be rising and with it consumer spending, then inflation etc.

Even with a fairly settled path ahead we would always recommend budgeting for higher costs, use this to help you budget and work out loan and interest rate costs.

The potential fly in the ointment here comes from across the pond. What the US budget issues and failure to agree a settlement in congress will do to our economy is yet to be seen. The saying that when the US sneezes that we catch a cold could yet come true, although in terms of the interest rate, any delay in the US settling their internal issues is only likely to postpone a rise in the interest rate here.

Bear in mind that the above is purely our opinion. Don’t come knocking on our door if things pan out differently, just budget correctly and remain aware of what is happening. Rant over!

If you have any questions about this article on the interest rate then please add them using the ‘reply’ button above, or give us a call direct.

By Lime Consultancy

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