Bank of England votes for first ‘real’ interest rate rise since financial crisis.
The Bank of England has voted for its first “real” interest rate rise since the financial crisis as it builds ammunition to tackle a economic downturn following Brexit. The Bank’s Monetary Policy Committee (MPC) voted unanimously to hike rates to 0.75pc, their highest level in nine years. Sterling spiked following the decision but enthusiasm on currency markets quickly faded as governor Mark Carney warned that policy ahead of Brexit needed to “walk, not run”. The MPC said that recent data has confirmed that the economic slowdown in the first quarter of the year was “temporary”and that more hikes will be needed to bring inflation back to the Bank’s 2pc target. The central bank’s policymakers lifted rates last November but it was widely seen as a correction of its post-EU referendum rates cut. The hike provides savers some relief and pushes up borrowing costs but rates remain close to ultra-low levels. “The main argument for raising rates now is that it gives the Bank more room for manoeuvre when the next downturn hits,” argued Hargreaves Lansdown economist Ben Brettell. “If interest rates are 1pc 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.” Millions of homeowners with variable rate mortgages face higher payments, with many braced for increased charges of £260 a year. Following the Bank of England’s decision to raise the Bank Rate from 0.5pc to 0.75pc today, many customers with variable rate mortgages will see their interest rates increase by a corresponding amount. For those with mortgages tied directly to the Bank Rate, the interest rate will increase on 1 September for customers with most major lenders. However, HSBC confirmed it will apply higher rates from tomorrow.