Bank of England governor, Mark Carney, has kept interest rates at the same 0.5% for another month as he believes the UK economy is still not fully recovered. Mr Carney has said the interest rates will have to remain at the same low rate for “some time”. This is great news for people with debt problems, however it is terrible news for savers.
Impact of Low Interest Rates
The interest rates are used to manage everything from savings through to the cost of some mortgages. For people who are wealthy and looking to increase their wealth via savings accounts, today represents a blow to their expectations. Low interest rates means their money can’t grow in a saving accounts, yet today is still seen as a positive situation for people with financial problems.
The Bank of England has predicted growth next year of 2.9%, which has improved from the 2.7% previously forecast only 3 months ago. It’s expected interest rates will climb when unemployment rates decline which today’s report shows is already happening. In two years it’s expected unemployment will be at 5.9%, instead of the 7% previously forecast. This is the point when it’s expected the Bank of England will increase the rates.
Interest Rates for People In Debt
For many people in debt the interest rates won’t matter – they don’t have a mortgage or any savings and the debts cause bigger problems. However for others, if the interest rates were to rise then their variable mortgage could increase. This would place added pressure on their mortgage commitments, which, coupled with the credit cards, overdrafts and personal loans could make it impossible to meet monthly payments. We wrote about 2.9 million families on the brink financially and an interest rate rise could push a large percentage towards needing debt support.
The interest rate being kept low is great news for people in debt. As the economy continues to recover it’s a welcome break to support people who would otherwise be struggling to afford life’s basic essentials.