How will interest rate rise affect me? - 9th August 2018


After much ‘will they, won’t they’ debate, the Bank of England has raised interest rates from 0.5% to 0.75%.

The decision will offer rewards for some savers but create an extra burden for some borrowers who are already finding it hard to meet their financial commitments. The good - or bad news depending on how you view things – is that there is unlikely to be another rise for about a year.

We’ve collated some key facts about how the rise may affect you, your family and your business.

Mortgage payments Fixed rate deals won’t see an immediate rise. However, when it comes to renewing that mortgage, the new fixed deals on offer, or the default variable mortgage rate that your deal reverts to, may have become slightly more costly.

Student loans Student loan rates for loans after 2012 and postgraduate loans are based on the level of inflation, as measured by the retail prices index (RPI), which is calculated using the March inflation rate and changes next month. These loans have no direct link to the Bank rate. The theory is that no interest rate rise might have pushed the inflation rate higher, which could have eventually fed through to student loan rates.

Foreign exchange rates There are numerous issues affecting the value of the pound, which fell slightly against the dollar and the euro after the Bank announced its decision to increase the rate. Unless there is a breakthrough on the Brexit negotiations, sterling will continue to remain under pressure.

Property market This depends on where you live. The market is currently more active in the Midlands and North whereas uncertainty over Brexit, stamp duty rises and higher tax on buy-to-let is already affecting London and the South - a 0.25% rate rise has little extra impact in this part of the country. Economists are currently forecasting 2-3% annualised price rises elsewhere.

Pension annuity rate A fixed retirement income for the rest of your life, an annuity can be bought once with a pension savings pot. The generosity of that income depends on the annuity rate, which generally would be expected to improve as gilt yields improve during a time of increasing interest rates.


Favourite News Stories...

SW&A Accountants launches it's new website in March 2013 - it's been a long time in the making and has had a lot of input from the owners Neil and Andrew - Andrew says " the website was designed to showcase our services in a lively and informative manner " ...

Our company intends to ensure that our new website become not only a hub of activity but also somewhere as a useful source of information for our current and prospective clients. Neil stated '"it is my intention to use the website as a tool to communicate with out clients; this is something we will grow over the coming years to incorporate our informative blogs, news and social media work."

Keep checking back to find out more..