The Bank of England have raised interest rates to 0.5%
UK interest rates have been increased for the first time in ten years, with the Bank of England Monetary Policy Committee voting 7 to 2 to raise the benchmark rate from 0.25% to 0.5%.
The last rate rise, in July 2007, was before the collapse of Northern Rock, and in March 2009 rates reduced to 0.5%, where they stayed until August of last year. That further reduction, to 0.25%, was intended to stave off a recession in the wake of the uncertainty following the Brexit referendum.
Today's decision to reverse that reduction is in light of rising inflation, which had reached 3.0% in September of this year.
Impact on your money
Those of us on tracker mortgages will see an increase in mortgage payments, with some lenders applying the increase from today, and some holding off til December.
Lenders set their own mortgage variable rates and so may take longer to pass on the increase to those on variable rate mortgages. MoneySavingExpert has noted a couple of building societies who have said they won’t pass on the increase to their customers.
Fixed rate mortgages won't change until the end of the fixed rate period.
Interest rates on savings are also set by the savings account provider, and it's possible that savers won’t all see the BoE rate rise in their savings accounts. Some providers have now announced increases to savings rates, although not all at the full 0.25%.
Anyone buying an annuity should get a slightly better rate, although perhaps not immediately. Annuity providers often reflect daily movements in the interest rates used in the prices of their annuities, but these are not directly linked to the BoE interest rate.
The impact on other investments like bonds and shares is a little more mixed, but the pound has dropped again against the US dollar (so your leftover holiday dollars in the drawer will be worth a little more).
That drop in the pound (to US dollar) exchange rate has increased the share prices of a number of big companies: those who have overseas earnings. When the pound drops against the overseas currencies (particularly the US dollar) those overseas earnings are worth more in pounds than they were before, and that feeds through to those companies' share prices.