What is Bank of England base rate?
It is the most important rate for financial and banking sector thatBank of England charges from other banks and other lenders when they borrow money, and it’s currently 3.00% (Increased from 2.25 % to 3% on 03 November 2022).
Bank of England’ interest rate influences all other banking interest rates in the UK, including borrowers who have for a personal loan, mortgages, credit cards or depositors who have savings accounts and various banking investments.
Bank Rate is more commonly known as ‘the base rate’ or simply ‘the interest rate’.
Interest rate and its correlation with economy
The recent base rate was increased on 03 November 2022 when MPC of BoE raised base rate to 3 % which means all variable and tracker mortgages will increase within days of this announcement from BoE. The average current mortgage rate on variable rate is already reached to 6.5 percent in October 2022.
As a result of higher mortgage rates, people will have to maintain repayments on their mortgage as it is a priority payment in line with council tax, food, groceries and utility bills. The common family in UK still has similar income levels which they had 3-6 months ago but the inflation rate is now above 10 percent in UK, which means common people will spend less so the inflation rate would eventually cool down. It is important that the inflation rate be lowered for a strong economy and the well-being of people where people can again do financial and investment planning and money keeps its value.
Who is affected the most after BOE base rate rise?
The rise in interest rate affects those households the most who are on variable rate (approx. 7 Million people in the UK). Most second charge loans are already on higher rates and further increase in BoE base rate makes families struggle to cope up with higher repayment on their secured loans.
Someone who is planning to invest in a new purchase of property see a higher interest rate on their mortgage.
The higher interest rate is seen as good news for savers, banks, and mortgage and insurance companies.
How families are affected by rise in interest rates?
The higher interest rate on variable rate loans means burden of payment on all basic household expenses as it eventually reduces disposable income or negate it. As a result, the families rely on their credit cards spending and borrow money to meet up their household and life style payments.
Money worries can result in other issues in the family i.e. mental well-being, financial stress and can result in delay and missing repayment on loans and credit cards.
Excuses for not consulting with debt and financial advisor
If you are struggling with your personal and business cash flow, it may be not your fault as higher inflation rate and mortgage rate could be indirectly responsible for it.
Many of us might be in hesitation that should we consult with debt advisor or not?
It is recommended to consult your debt and financial problems ASAP as these can spiral up very quickly and you can be under higher debt quickly than anticipated.
There are five top excuses which people have for not speaking to debt advisor :-
- I can deal my financial worries myself, let some time pass.
- You think that a debt advisor will judge you that how you are struggling financially.
- You think you are in severe financial issues and no one can help you in complex financial situation you are in.
- You think that a debt advisor may charge you appointment fee and can sell you something else.
- What if you are not happy with debt advisor’ advice and disclose your financial worries.
Our office offers free, confidential and no obligation advice. We have debt advisors who speaks multi languages and it is very easy to meet up for free consultation.