The base rate has gone up 0.25% to 5.75% in what marks the third rise of 2007. The Monetary Policy Committee made the decision today to put up the rate from 5.5%. It was already raised 0.25% in January from 5% and again in June to 5.5%.
The new rate will benefit savers, but is yet a further blow to borrowers on variable and tracker rates. For example, the monthly repayments on a mortgage of £150,000 at 5.5% were £921, whereas at the new rate of 5.75%, they will rise to £943, an increase of more than £20 a month.
“The rate rise puts further pressure on homeowners’ finances” said Moneysupermarket.com’s Chief Executive, Sean Gardner. “It’s not the effect of one increase, but of five increases in eleven months that is taking its toll.
“More than 7.4 million household bill payments have been missed in the past six months, proving that the Bank of England’s actions are already hitting home,” he said. “This increase has the potential to worsen this situation further.”
But Adrian Coles, Director-General of the Building Societies Association, is urging consumers not to panic in the wake of the rise, but to calmly evaluate the affect that it will have on their finances. “If people think they are going to have a problem paying their mortgage, they should talk to their building society straight away”, he advised.
Trevor Williams, chief economist for Lloyds TSB Corporate Markets also tried to placate the public, predicting that this will be the last rise for some time: “It is safe to say that with today's decision the Bank Rate has plateaued for the time being. It could be spring next year before we see another move, and that move is more likely to be down than up."
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