August 1 2014 Latest news:
Adam Aiken, Editor
Friday, April 6, 2012
The outlook could be gloomy for both savers and borrowers, with fears growing that mortgage rates will start to rise while savings rates remain low.
The Bank of England’s monetary policy committee (MPC) this week held the base rate at its record low of 0.5pc for the 37th consecutive month. The move was expected, but it means savers face an even longer wait until their returns pick up.
But although mortgage costs have also been at record lows in recent years, lenders such as Royal Bank of Scotland, Halifax and the Co-operative Bank have recently announced increases to their products.
It has raised concerns of a double-whammy involving more expensive borrowing at the same time as poor returns on savings – and most industry-watchers believe the base rate (and therefore probably savings rates) will remain low for some to come.
“The MPC’s decision to leave the base rate unchanged was widely expected throughout the industry,” said Yorkshire Building Society group treasurer Chris Parrish.
“Most economic commentators concur that the base rate is unlikely to rise this year.”
But Mr Parrish added: “Despite the base rate remaining unchanged at 0.5pc, some lenders have announced that they will be increasing their standard variable rates over the coming weeks, and more may follow, and it’s important for customers affected to review their mortgage arrangements.”
Scott Corfe, a senior economist at the Centre for Economics and Business Research, went a step further and said he thought there would be no change to the base rate next year, either.
“Although an immediate financial crisis in the eurozone has been avoided, the inherent instability of the single currency area remains a huge risk factor for the world economy,” he said.
“Given this, we don’t expect the Bank of England to move on interest rates until 2014 at the earliest.”