The Bank of England is set to deliver an important decision regarding the financial crises on Thursday. Economists and investors are hopeful to witness the first increase in a decade.
The decision is being made after the Monetary Policy Committee (MPC) finished its groundwork in September. The MPC was told to prepare for the eventuality of an increase “over the coming months”.
The increase was subject to the stability of the economy. Sources are now hopeful that the Bank will raise its rates from its current 0.25%. If passed, it would be the first increase experienced in the country since July 2007.
The move would come as a relief to commercial banks. All commercial banks use the Bank of England’s base rate as a reference point for their own accounts and loans. Thus, higher rates would hit households with a standard variable rate (SVR) or tracker mortgage.
The increase would also benefit the 45 million savers who still enjoy higher returns from accounts that pay variable interest rates.
However, charities and business groups have warned the Bank against raising its rates. They claim that an increase would cause difficulties for homeowners and smaller companies. However, some like mortgage lender Nationwide, have described the impact to come as “modest” for borrowers whose repayments are linked to the base rates.
Records show that more homeowners are attempting to fix the interest rate charged on their mortgages. The number is much higher than it was merely a decade ago.
The total share of new mortgages taken out on a fixed rate was found to be 88% in the second quarter of the year. This is comparable to the 46% recorded at the start of 2008.
Financial markets in general are hopeful. They believe that there is more than 90% chance that the Bank will increase rates to 0.5%.
This increase would come barely a year after the rates were slashed to 0.25% post-Brexit.