Why Mark Carney was right to put up interest rates

The Bank of England today increased interest rates to 0.5 per cent in the first rise for a decade. The new rate reverses a cut made last summer after the EU referendum and still leaves rates at near record lows

Why Mark Carney was right to put up interest rates

They've endured years of pathetic rates with returns on most accounts not even beating inflation.

"Some of our savers have accounts which track Bank Base Rate and these will increase by up to 0.25 per cent within the next seven working days".

"With savings rates with the High Street providers paying as little as 0.01%, it's time for savers to vote with their feet and earn as much interest as they can elsewhere", says Anna Bowes of Savings Champion.

Deputy governor of the Bank of England said that more rate rises are on the cards.

"Interestingly, such increases can sometimes invigorate the market by causing a minor stampede, although that's unlikely to be the case in the current climate". In the United Kingdom fixed-rate mortgages are often limited to one to five years before converting to a standard variable-rate mortgage.

"The 0.25% lift in the base rate will likely be passed on to borrowers on variable-rate mortgage deals nearly immediately-with a material effect", said Simon Gammon, managing partner at Knight Frank Finance.

Nearly four million households face higher mortgage interest payments after the rise, raising concerns as families struggle to battle rising inflation and stagnant wages.

The move comes as the Bank looks to dampen Brexit-fuelled inflation, which it predicts will peak at around 3.2% this autumn.

They said: "Following the rates rise, we would expect to see some higher interest rates to be passed on to savers".

TSB announced a smaller increase, of 0.15 percentage points - although its variable rate mortgages will rise by 0.25 percentage points from next month.

The average house price across the Black Country boroughs of Dudley, Walsall, Sandwell and the city of Wolverhampton varies between around £140,000 and £170,000, rising over £200,000 in Staffordshire. Those who will feel the biggest, most immediate effects are the millions of homeowners with variable-rate mortgages.

It's not very much, but Stuart Farquhar at the University of Wolverhampton is anxious that, for many families, it won't take much to put them in serious financial trouble.

First time buyer Ricky Skinner, 32, from Bristol, is one of the millions who've never experienced a rate rise.

"Standard and Poors', the ratings agency, has said consumer debt is unsustainable", said Dr Farquhar.

However, they appear more willing to pass the rate rise on to borrowers.

When asked at the press conference if this was the start of a rate rise cycle, Mr Carney said the forecasts show that two more rises are needed to return inflation to target.

Pensions will also receive a boost, with longer-term annuities strengthened by the rise, benefitting those approaching retirement.

And those banks and building societies that have announced plans to increase savings rates from December are simply doing "a PR exercise", according to Andrew Hagger of Moneycomms.

"We'll watch it closely".

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