In a widely expected move, the Bank of England’s Monetary Policy Committee (MPC) voted by a majority of 7-2 to increase the Bank Rate from 0.25% to 0.5%. This is the first increase in interest rates since July 2007 when the rate increased to 5.75%. The interest rate has been fixed at 0.5% since the crash of 2009 and was further reduced to 0.25% in August 2016 following worries of economic instability after the Brexit vote.
This increase in interest rates is likely to be followed by some further modest increases over the short term as the Bank of England tackles higher inflation and the impact of Brexit. The increase will mean higher borrowing costs for households. Variable and tracker mortgage rates were being increased within hours of the announcement. Mortgage lenders are also expected to increase the cost of new fixed-rate mortgage deals.
Savers should expect to see some modest increases in the savings rates on offer.