Interest rates could go up TWICE this year – but how will it affect you?
We spoke to some experts who had a look at the different ways the raise will shake things up
THE Bank of England may be set to raise interest rates twice this year, according to a forecasting body.
Bank governor Mark Carney, who said increases will be gradual, confirmed the change is ''likely''.
The forecaster EY Item Club predicted GDP growth of 1.6 per cent this year and 1.7 per cent in 2019.
It also reported the rates are likely to be raised twice next year.
The rates raise will reportedly be put in place in a bid to "gradually but steadily normalise monetary policy".
Currently the base rate is 0.5 per cent, which was agreed by the Bank in February of this year.
What is the base rate?
SIMPLY put, it’s the country’s official borrowing rate, and is the rate the Bank of England lends to all the other banks in the UK
It is incredibly important as it a guide for lenders on what rates it can offer – and therefore impacts mortgage rates, credit cards, loans and savings.
It was stuck at record low levels for a decade because of the state of the economy after the financial crash in 2008.
It was raised back to 0.5 per cent last November, but after today’s decision by the Bank has seen markets pencilling in more than three hikes within three years., starting later in 2018.
What does this mean for savers?
If you have a savings account, well here's some excellent news - the rates is the likely to benefit you the most.
Hannah Maundrell, editor in chief of warned not to get too excited just in case the increase doesn't get ''passed on''.
She said: "Savers could see a slight benefit from an interest rate rise, but only if their bank passes on any rate increases.
''Those looking to buy an annuity might also get more for their money, but this is only one of many options to consider when you’re looking at funding your retirement and you should look to get independent financial advice.
"A rate rise could potentially have a positive impact on the comparative value of the sterling too, which would be especially beneficial for the cost of importing goods,'' she added.
Noting the change will make the pound sterling stronger, she continued: ''It could also be good for travellers as you may get more foreign currency for your money when going abroad.''
What will it mean if you're in debt?
There are serious concerns UK households are carrying too much debt after a decade of low-rates made borrowing on credit cards extremely cheap.
If your mortgage is a tracker or variable rate deal, the rise will mean an increase to your monthly payments.
Money Saving expert's managing editor, Guy Anker, said: ''The increase may only be small, but homeowners need to be aware they'll be paying more.''
They added: ''Those on a fixed-rate mortgage won't be affected by the rise, so if you're looking to buy a property or remortgage it might be worth looking at a fixed-deal instead to protect yourself against more rate hikes.''
Latest In Money
How to protect yourself ahead of the rise
- Be aware of rising rents: While tenants don't have mortgages, they could be exposed to rising rents so get in touch with your landlord - especially if your contract is near renewal
- What is your lender/bank doing?: Last year just minutes after the rise in interest rates was announced some banks began announcing increases on their mortgage rates.
- Swap from a variable mortgage to fixed: Speak to your bank to get the latest update on your borrowing and if you can swap for steadier rates.
- Fixed-rate: A mortgage where the interest rate is "fixed" for the length of time of the deal. More than half of UK homeowners are on this type of mortgage and their monthly repayments won't be affected by today's rise.
- Variable-rate including tracker: The rate you pay is based on the base-rate and today's rise will be reflected in higher monthly costs. A tracker mortgage tracks base rate, so if it rises, payments increase and if it falls, payments fall.
We pay for your stories! Do you have a story for The Sun Online Money team? Email us at [email protected] or call 0207 78 24516. Don't forget to join the for the latest bargains and money-saving advice.