When Will Interest Rates Increase?

Written by Karen Bryan

Bank of England keeps interest rates at 0.5% - Captured from @bbcnewsIt’s hard to judge when UK interest rates will increase. In fact, if you’d asked me that in Spring this year, I’d have said by the end of 2011 or the first half of 2012.  As I write this now in September 2011, I think there may not be an interest rates increase for at least another year, or even longer.

Of course people who are borrowers will be crossing their fingers that interest rates stay at the current low rates for as long as possible. If you have a mortgage, it may be worth looking into a long term fixed rate deal to make sure that you don’t face an increase in repayment when (if?) interest rates finally start to go up.

As a saver I’d like to see interest rates go up. But interest rates are only half the story. The issue at present is that the rate of UK inflation is running at around 5% and there are no savings accounts paying 5% interest, so our savings are losing spending power. It’s bad enough that your savings are losing value but unless they are in a tax free cash ISA, you are also paying tax on the savings interest. Therefore I’d like to see interest rates increase and inflation to fall so that we can at least maintain the value of our savings.

Update December 2012 – Far from increasing, interest rates on savings account have been falling since Spring 2012. I’m so glad most of our savings are in fixed rate accounts getting much better rates of interest than are available at present.