Interest rates could be kept on hold for longer in the event of a “disorderly” Brexit, according to the Governor of the Bank of England.
Speaking at a conference in May, Mark Carney said that plans to raise rates could be delayed to support economic growth in the UK in the event of a “sharp Brexit”. He hinted that rates could be frozen or cut even if inflation, or the rising cost of living, remains higher than its 2% target.
Usually if inflation is significantly above target, the Bank would increase interest rates so people spend less, which tends to reduce inflation. If inflation looks likely to fall below target, rates may be cut to boost spending in the economy and help inflation to rise. However, Mr Carney said a disorderly Brexit “could put monetary policy on a different path.”
The Bank’s Monetary Policy Committee voted to keep the base rate on hold at 0.5% last month, following Office for National Statistics (ONS) figures which showed the economy grew by just 0.1% in the first three months of the year.
The latest inflation report still suggests two rate rises by the end of 2019, with future increases likely to be “limited” and “gradual”.
No-one knows for certain what will happen to interest rates over the next few months, particularly as it’s not yet clear whether we will experience a smooth Brexit or not.
If you’re concerned about the impact of potential rate increases in coming months, you may want to consider locking into a fixed rate mortgage while rates are still low. This can provide valuable peace of mind that your monthly payments won’t change even if rates go up.
Remember not to base your decision on the headline rate alone though, as arrangement fees and other costs can have a significant impact on the overall cost of any deal. Seek advice if you’re not sure which deal to choose. A broker can crunch the numbers on your behalf to help you find the best mortgage to suit your individual circumstances.
Brexit could delay UK rate rises