Published: Fri, August 03, 2018
Finance | By Marshall Campbell

What the interest rates increase means for you

What the interest rates increase means for you

BOE officials voted unanimously to raise the central bank's policy rate to 0.75% from 0.5% following the rate-setting Monetary Policy Committee's August meeting, the BOE said Thursday.

Traders said though the market was largely prepared for a rate hike on Wednesday, yields would still shoot up by 5-10 basis points after one, and the surge would be much more if the RBI also tightens its stance.

"The vast majority of new loans, 90% are on fixed rates".

He said: 'Tracker mortgage customers who wish to get a bespoke idea of what a rate rise means for their individual circumstances should click on our interest rate change calculator.

HDFC Bank raised rates for deposits above Rs 50 million to a range of 4.25-7 per cent, effective Thursday.

He put the rise down to the Bank wanting some flexibility to allow it to lower rates again after Brexit.

Economists had been predicting the rise given that the economy had performed in line with the Bank's last forecasts in May, when it backed off from a widely anticipated hike to wait and see how the economy recovered after a weather-hit start to the year.

Where will rates go from here?

Trump chief of staff says he will stay at Trump's request
Trump tweeted a photo of himself with Kelly on Monday to celebrate his deputy's first year. Trump is known as a mercurial boss whose feelings on key staffers can shift rapidly.

Bank Governor Mark Carney said the hike, only the second since the financial crash forced rates down to an historic emergency low, warned of further rises ahead.

Surendra Hiranandani, chairman and managing director of House of Hiranandani, said inflation is expected to trend upwards and might surprise in the second half of the year owing to increase in higher government spending.

The monetary policy committee of a country uses the reverse repo rate as a tool to control the money supply in the country.

When rates last increased, Bank of England rate setter Ian McCafferty told LBC he "fully expected" savers to benefit. If interest rates are 1% or more by the time the economy sails into stormier seas, policymakers will at least be able to cut rates a couple of times before cranking up the printing presses for more QE.

Killol Pandya, Head, Fixed Income, Essel Mutual Fund, said, while market is discounting a rate hike, he believes it is a touch-and-go matter with nearly even probability of rate action.

It is also implies rates will rise substantially faster than the market now expects. The MPC also noted that United Kingdom growth over the forecast period would nudge slightly higher while inflation will remain above 2% before reaching target in 2020. "Although underlying tone of RBI statement appeared balanced, inflationary risks and outlook highlighted by the central bank indicates hawkishness. We expect RBI's tenor to remain neutral to hawkish".

The average standard variable rate mortgage is 4.72%.

Smith goes on to say the BoE may be looking to raise rates faster and further than markets now give it credit for, given its latest forecasts for inflation and economic growth, but that Brexit may prevent it from doing this.

Like this: