|
3rd August 2006
The Bank of England as of today (3. 8. 2006), have raised the base rate by 0.25%, increasing it to 4.75%
The base rate has remained at 4.5% for a year now, following a reduction of 0.25% in August 2005.
What does this mean for consumers?
Any financial product that has a variable interest rate will be affected by this increase, including credit cards, loans and mortgages.
Almost all credit cards have a variable interest rate, that tracks above the base rate, so consumers will see credit card interest rates rise slightly.
Mortgage and loan customers on a variable or tracker rate product will also see an increase in their interest rates, pushing up their monthly repayments slightly.
Customers on fixed rate loan or mortgage products will not be affected by this increase. In the case of fixed rate mortgages, repayments will remain the same until the end of the period of your fixed rate.
Will they go higher?
It's never easy to say whether interest rates are going to raise or reduce, but if the UK ever wants to get into the European Union they are going to have to reduce the base rate a fair amount to get in.
Unfortunately for the Bank of England, it's never quite as simple as just reducing the base rate. It has to be done slowly over a period of time, to keep inflation low and the economy strong.
Do I need to do anything?
This slight increase should not create a mass panic for anyone on a variable interest rate product. Although not impossible, it's quite unlikely for the base rate to increase by any considerable amount over the next year.
You don't have to do anything right now.
However, if you are worried about further increases (although the situation as it stands is not something to be overly-worried about) and the lock-in period of your mortgage is set to expire soon, you could change to a fixed rate mortgage deal, although you will find that fixed rate mortgages have a higher starting interest rate than variable or tracker rate mortgages do.
As for credit card customers, all credit cards have a variable interest rate, unless you are on a fixed for life balance transfer deal, so you do not have to do anything right now.
Find out more on low interest rate credit cards.
 Back to latest news
Back to news archive
| 
