Yesterday, (Thursday 4 August 2022), The Bank of England increased interest rates by 0.5% to 1.75% making it the highest increase in 27 years.
The UK is expected to enter a recession, with the cost-of-living crisis continuing throughout 2023 before beginning to ease in early 2024.
The Bank of England have said the increase relates to higher energy prices due to Russia’s invasion of Ukraine which has seen gas supplies restricted, and higher food prices for the goods we import into the UK.
Cost of goods is higher than ever before due to restrictions during the pandemic which meant production goods were harder to source, in turn meaning businesses are needing to charge more for their products to cover the higher costs they are facing.
What this means
Rises in interest rates make borrowing for individuals and businesses more expensive. Individuals on tracker or variable rate mortgages will have an increased monthly mortgage payment of up to £50 per month. This increase alone creates an addition of £600 to mortgage costs within the year.
Businesses with commercial lending will also likely see an increase in loan repayments which is an additional cost for businesses who are already tackling the increased costs due to inflation across the board.
Individuals and businesses are being advised to begin saving where possible, which will in turn help to reduce inflation, due to less spending.
Reports show sales growth has slowed down, with contacts reporting customers are buying cheaper brands and opting to repair items rather than replacing them. It has also been reported that subscription-based services are seeing a decline in renewals, particularly insurances.
How we can help you
If you’d like to discuss your finances and our services we can provide to support you through the cost-of-living crisis, call us on 01228 904904 or pop us a message at email@example.com.