Interest rates held steady for sixth time in a row
interactive investor's Myron Jobson comments on today's decision by the Bank of England.
9th May 2024 12:25
by Myron Jobson from interactive investor
Commenting, Myron Jobson, Senior Personal Finance Analyst at interactive investor, says: “The Bank of England (BoE) has kept interest rates steady for the sixth time in a row and will continue its 'wait and see' approach until it feels that the conditions necessary to cut the base rate are met. Premature cuts to interest rates risk unpicking the BoE's efforts to tame high inflation.
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“While headline inflation has fallen to 3.2%, which is still above the 2% target, wage growth appears to be too high for comfort for BoE policymakers, with a tight labour market exacerbating matters. The worry is this would entrench higher inflation over time.
“So, for now, Britons are still being buffeted by a double whammy of high inflation and high interest rates. With interest rates likely to remain high for some time, debt repayments will be a priority for many.
“The stark reality is even if the BoE cuts interest rates in the summer, high interest rates aren’t going to disappear overnight. Interest rates could remain higher for the next decade than they were in the decade after the 2008 financial crisis. This shift has been particularly challenging for mortgage holders who face higher costs when they remortgage stemming from higher mortgage rates.
Savings
“Savings rates have seen little change in recent weeks, but the overall trend has been downwards since the start of the year in anticipation of the BoE lowering rates in the future.
“The simple message for savers is: get a move on to nab the best deals before they’re gone. The best savings rates are seemingly on borrowed time due to the anticipation of cuts to interest rates later in the year.
“Those who can afford to put money away for at least five years or more should consider investing for the potential of long-term inflation-beating returns that far outstrip savings rates.”
Mortgages
"Mortgage rates have edged higher in recent weeks on the expectation that the cut to the base rate won’t happen as early or as often as previously thought. This is bad news for first-time buyers and homeowners seeking to remortgage, who face a colossal challenge when it comes to finding affordable deals.”
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