Interest rates were held at 0.25% again this month, but the Governor of the Bank of England warned that rates could increase “over the coming months.”
The Bank’s Monetary Policy Committee (MPC), which determines how interest rates should move, voted by seven to two to leave rates unchanged this month, but emphasised that rates could rise earlier than expected.
Why could a rate rise be on the cards?
Inflation, or the cost of living, reached 2.9% in August, well above the 2% target. Raising rates helps control prices, which means the Bank could choose to hike rates sooner rather than later. Prior to yesterday’s meeting, economists predicted we wouldn’t see a rate rise until next year at the earliest, but now some claim we could see an increase as soon as November.
However, the Bank of England has previously hinted that rates could start to increase soon, only to leave them unchanged.
It’s important for anyone with a variable rate mortgage to think carefully about how they would cope financially with higher monthly payments. If you’re worried your mortgage could become unaffordable, you may want to consider locking into a fixed rate deal, so that your payments won’t change even if interest rates go up.
The good news is that there are plenty of competitive fixed deals to choose from. When considering which deal to go for, make sure you work out the overall cost of the mortgage including any fees rather than focusing on the headline rate alone. If you’re unsure, seek professional advice on which mortgage is likely to be best for you based on your individual circumstances.
Interest rates held again in September - but a rise could be imminent