The Bank of England announced yesterday that they are raising interest rates from 0.5% to 0.75%. Whilst this is good news for savers, who are likely to benefit from improved returns, many are sceptical of the effect that it will have on borrowers; those on a low income will be hit hardest by inflated mortgage and loan repayments.
Now is a great time for savers to shop around for the best deal, as banks will be reviewing their rates. However, high street banks are unlikely to pass the full increase over to customers, and returns on savings products will remain modest as ever. According to figures released by the BBC, ‘no easy access savings account at a major high street bank pays interest of more than 0.5%’.
For those looking to get more from their money, it’s prudent to consider how a lower risk investment might help to achieve this. First time investors may wish to look for property-backed opportunities, with medium interest rates and a low minimum investment whilst they build confidence – for example, Kuflink offer up to 7.2% interest pa* and with over £21 million invested through their platform to date, there have been 0 investor losses!
Although previous rate rises have often not led to an equal rise for borrowers, they do tend to mean an increase in repayments. The BBC states that, for a £150,000 variable mortgage, the annual cost is likely to increase by £224 – not an insignificant sum for those already struggling.
So, what can you do if you’re concerned about how you’ll meet this sudden increase in outgoings?
One strategy is to take time to map out your financial aims, and how you’ll achieve them. Consider how budgeting, saving and investing could move you closer to your goals. Even if increasing your income isn’t a viable option, there are plenty of ways to make your existing funds work harder for you!
*Capital is at risk. Past performance does not guarantee future results.