Sunday, 14 August 2022

Interest rates rise to help dampen inflation

INTEREST rates have been increased by the Bank of England to their highest level since 2009.

The change, from 0.5 to 0.75 per cent, is designed to put a dampener on inflation.

Mark Carney, the Governor of the Bank of England, made the announcement on Thursday last week.

He said: “With domestically generated inflation building, and the prospect of excess demand in the economy emerging, a modest tightening of monetary policy is now appropriate, to return inflation to its two per cent target and to keep it there.”

Most of the banks and building societies are still undecided about whether to pass on the interest rate changes to borrowers and savers, so the extent to which this change will affect the property market remains to be seen.

The debt charity StepChange warned that the hardest hit would be households that rely on credit to make ends meet.

Chief executive Phil Andrew said: “While a rise in interest rates might be right for the wider economy, from a consumer debt perspective, many households are walking a precarious budget tightrope, as their incomes don’t stretch to cover the basics each month. These are the households that a rate rise will affect most.”

He added: “Government and policymakers need to take parallel steps to ensure support is there for those who are negatively affected. They mustn’t lose sight of what a rate rise means for real people on a tight budget. The fact that the wider economy can cope doesn’t always mean individual households can.”

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