Experts urge action ahead of interest rate hikes

Families have been told to get ready for an imminent interest rate hike. The Bank of England has given its clearest warning yet that rates will have to rise soon to keep a lid on soaring inflation following a surge in energy prices.

But while some experts forecast that the base rate could rise from its all-time low of 0.1% before Christmas, others think it could be longer before any increase is announced.

With interest rate changes notoriously hard to predict, this leaves savers in a quandary as to what to do with their money. Should they hold off investing in a fixed-rate bond in case rates go up? Or should they grab a top fixed deal now to avoid missing out on extra interest in the meantime?

The consensus among experts is not to wait. Whatever happens to the UK and global economy over the next year, there is a clear sense that the ultra-low interest rates we have seen during the pandemic are on the way out. For borrowers, including mortgage holders, that is obviously bad news. For savers with cash deposits, which means most of us, it may bring a bit of relief after long years of negative real returns.

Fixed-rate deals have edged up in recent weeks, and there is also no guarantee that savings deals will rise in line with any increase to the base rate, as they have previously. Instead, returns are being driven up by fierce competition between smaller banks, which are keen to attract money to fund lending. And this has pushed up rates despite the base rate remaining at 0.1%. While rates have risen in the last couple of months, they are now easing off and there is a danger of more cuts.

If you have any concerns over how interest rates may affect you and your investments, please reach out to your financial planner.

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Sources: Techlink