The Bank of England has raised interest rates by 0.75 percentage points – the highest single rate rise since 2008.
As the UK battles with soaring inflation, now tipping over 10%, the BOE has taken ‘drastic’ action to curb inflation rises.
Drastic may be over-egging it, but since the turn of the year the Bank of England has been gradually increasing the base rate by just 0.25% each time.
With soaring energy, fuel and food bills, a 0.75% rise could have a huge impact on the property market as this affects mortgage affordability.
The bank rate determines the interest rate the Bank of England pays to commercial banks that hold money with them.
It influences the rates those banks charge people to borrow money or pay on their savings.
Although it is easy to speculate, going by the trend of the last 12 months it would be sensible to assume the bank base rate will have further incremental increases in the near future.
The Bank of England has a responsibility for keeping inflation (price rises) low and stable. The Government has set them a target of keeping inflation at 2%.
In order to bring inflation down, the Bank of England raise rates as this tends to reduce spending.
Savers have had a difficult time since 2008 in getting a good return on their investment through traditional saving methods. So as interest rates rise, conservative investors will be able to take advantage of increased savings opportunities.
However, typical savings rates for lump sums in the UK are still only circa 2-4% and until they start pushing a lot higher, even the safest of investors are essentially losing money against inflation.
If we factor in predicted capital growth in the UK property market, typical bank savings accounts will only suit those looking for a small, safe return.
Investing in property with Prism Properties, our current ROI rate is a very competitive 15% – higher than traditional bank savings accounts and the official rate of inflation posted by the Bank of England.
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