The Bank of England has increased the base rate from 0.25% to 0.50%, which represents the first back to back increase since 2004. With inflation at a 30 year high, it would have moved sooner and higher if it had not been down to the possible economic impact of the Omicron variant.
Commenting on this, Savings Expert, Kevin Mountford has said: “From a borrower perspective, around 74% of all mortgage customers are on fixed products so they will not face any immediate hikes in their payments but of these around 1.1m of these expire in 2022 so this is a possible problem for the future. In terms of the circa 2m customers on either tracker or standard variable rate products, they are likely to see monthly costs going up between £15 and £25 per month.
“This comes at a time when household budgets are struggling due to inflationary pressures and earlier news from Ofgem means that there could be an average of nearly £700 per year increase on energy bills.
“The counterargument for a base rate rise is that it encourages us to save more and spend less thus reducing the demand for goods. However, if recent events are anything to go by then the big banks, in particular, have failed to improve savers rates and now is the time that we look to shop around and make our money work as hard as possible and switch to a better rate.”