The recent interest rate rise has angered some economists and business journalists alike.
Some believe that although the High Street banks have gone out of their way to inform customers that their tracker mortgages will now be more expensive, none, apart from the Skipton Building Society, have rushed to inform lenders that they may soon be earning more on their accounts.
The banks are also dithering when it comes to passing on the increase by saying they will need time to review the situation.
One business journalist, Maggie Pagano, believes the big banks will probably find some reason or other to pay the increase to selective accounts rather than across the board and says, the fact is, Barclays, First Direct and Halifax had already pushed up their two-year fixed deals ahead of the rise.
The interest rate rise, although historically low, sees the highest level in 10 years. The Bank of England is working towards a gradual increase over the next few years to what economists say will be 1.5%. Mark Carney, the Governor of the BOE is aiming to ‘normalise’ interest rates.
This could be good news for savers, but Banks need to make sure that they pass on the rises to savers with a quick and professional response. Savers were one of the first to suffer when the financial crash hit.
The MPC, the Bank of England’s Monetary Policy Committee. cites the need to damp down inflation as the reason for the rate rise. They say the concerns are that with record low unemployment, rises in wages and businesses finding it difficult to recruit the staff they need, prices will rise, leading to a rise in inflation.
Some experts disagree with this view, saying the indications are of wage stagnation with more than 5 million people employed in the gig economy or self-employed, which shows no sign of an increase in wages.
So, what does the interest rate rise mean to most. This will often depend on your lender. The rate of 0.75% is known as the base rate, this is the rate at which banks can borrow. Banks then add their own interest on to their products, such as mortgages etc., and these can vary widely from bank to bank and according to a consumer’s ability to repay (credit rating).
For 1.8m home owners with Standard Variable Rate mortgages, they pay around 5 per cent while small-business owners pay around 7 per cent or more on their loans while base rates are at 0.75 per cent.
Credit cards rates are already high for many, with rates of 20 per cent or more. Other pay-day loans can be as much as 100 per cent.
When it comes to the economy, there is a view from economists that it is fragile. Britain’s private debt level is about 217 per cent of GDP and rising, while public debt is now approaching 90 per cent of GDP.
The UK’s savings ratio is on the floor at 4 per cent, the third lowest since 1963, while the country’s 27m households have been net borrowers since 2016, the first time since records began.
Add into the mix the uncertainty over Brexit, low paid jobs and the rising tide of personal debt for many households and the future could look uncertain and is why many economists believe the interest rate rise was a mistake.