Mortgage payments set to rise as Bank of England raises interest rates

Credit Crunch Threatens Economy

In addition to the uncertainties that still remain over Brexit, the rate hike can be seen as part of a wider global monetary policy that will likely negatively affect the strong returns United Kingdom real estate has experienced in the last few years.

Britain's economy appears to be picking up speed, according to a survey on Friday that will reassure the Bank of England a day after it raised interest rates for the first time in a decade. The Bank of Canada has increased its benchmark rate twice this year as the Canadian economy started the year as the strongest in the G7.

"However, we don't believe it is the end of cheap mortgages with Nationwide actually cutting its fixed rates this week, illustrating the ultra-competitiveness of the market".

Nearly four million households face higher mortgage interest payments after the rise, but it should give savers a modest lift in their returns.

What is more of a worry for borrowers is the outlook for further rises, with economists predicting as many as three rate increases over the next two years. However, he specified that the independent variable for that policy will be Brexit negotiations. However, inflation is expected to fall back over the next year. 'Mortgage holders will be the most affected as tracker deals will automatically increase in line with base rate and variable rate deals are likely to follow suit, ' she said.

A QUARTER of a million "zombie" firms may finally be killed off if interest rates rise as expected.

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Why does the Bank of England very interest rates?

Generally, higher interest rates encourage saving by raising the incentive to put money in the bank. Some lenders may well be prepared to absorb rate increases into their margins, as they are still chasing business.

By changing Bank Rate - the rate of interest that the Bank of England pays on reserve balances held by commercial banks and building societies - the Bank of England is able to influence a range of other borrowing and lending rates set by commercial banks and building societies, and hence spending in the economy, in order to keep inflation on track to meet the 2% inflation target. Since the vote to Leave the European Union, the pounds' devaluation has triggered the highest inflation among the G7 economies.

The MPC expects inflation to peak above 3 per cent in October as the weakening of sterling and increases in energy prices are passed to the consumer. "But that relies on the data, in particular on wage growth, improving and, more importantly, Brexit going smoothly", Smith adds.

Last month's services purchasing managers' index (PMI) produced a better-than-expected result, showing the sector picking up to 53.6 in September, easily above the 50 level that separates growth from contraction.

The bank's Monetary Policy Committee (MPC) voted for the rise at a majority of 7-2.

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