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Glasgow
+44 (0)141 221 2984

Edinburgh
+44 (0)131 225 6366

Stirling
+44 (0)1786 451745

Dumbarton
+44 (0)1389 765238

Hamilton
+44 (0)1698 459444

French Duncan

Savings Rates - Hold Your Breath!

I think it would be fair to say that the Governor of the Bank of England, Mark Carney, has not had a lot of practice at announcing interest rate rises.  In fact, having been in the job for almost 6 years, this is only the second time he has made such an announcement. Given this is only the second rate rise in 9 years this may not come as a surprise to many.

The Bank’s Base rate will now rise from 0.5% to 0.75% which, to those of us who remember pre 2009 rates, will not exactly create a feeling of overexcitement. However thoughts will naturally now turn to consider the implications of this rise and what it will mean for us all.  

Borrowers (especially those with variable or tracker mortgages) should expect to see their interest repayments rise. Hopefully as this is only a modest rise I am hopeful that these increases will not be too painful. If you have a £100,000 mortgage and the rate rises by 0.25% you should expect a rise in your annual payment by around £150.   

Savers should, in theory, be very excited with an interest rate rise. However my instinct is that there may be a wave of disappointment across the country, when the rate went up in November 2017 it was noted that over 50% of savings rates did not move at all. Whilst there may be some movement this time around I suspect it may be modest.

Expectations are that the Bank of England may not be in any hurry to lift this rate again in the near future hence these modest rises may be all we get for a while and the high interest rates many of us remember from the last decade will remain a distant memory. On the other hand, if inflation continues to tick up, then the Bank may be forced to increase the base rate further as a control mechanism against excessive spending. Clearly this is speculation at this point, but it is an area to keep an eye on as there could be knock-on effects in the wider economy.

For now, no doubt the savers will hope I am wrong and the borrowers will be hoping I am right. We may have to write further on this subject - time will tell.