First bank rate rise for 10 years – will more rises follow?

James Durie

By James Durie, Chief Executive of Bristol Chamber & Initiative at Business West

While yesterday’s Bank of England rate rise of just 0.25% to 0.5% is not really a bombshell and fairly predictable, I think that the big question is: Will there now be more rate rises?

For the average homeowners in Bristol and the West of England, the increase to their mortgage will only be around £12 – £15 a month.

Not much, most of us might think, but for a young couple looking to buy their first home with little room for financial manoeuvre, an extra £15 a month could be an added worry.

At this moment of some historic significance – a first bank rate rise for 10 years – there must now be concerns that more rises could follow.

The losers will be people, and there are something like 3.7 million of them, who have variable or tracker mortgages who now face rises in their monthly payments.

Those householders with fixed mortgages will benefit from today’s decision, of course, with no rise in their payments. But in recent weeks, a lot of these fixed deals have been closed down in anticipation of today’s rise in bank rate.

The winners will be the savers – especially many pensioners – who have seen their savings stay static for years.

The Bank of England points to the fact that inflation has now risen to 3% and there is a need to try and keep it down to its target of 2%.

However, in a report published earlier this week, there are signs of many businesses in ‘significant’ financial distress – something like 448,000 of them – according to the business recovery specialist Begbies Traynor.

This rate rise will not be welcomed by these businesses, and there are also concerns that some jitters about the economic situation will affect spending in the shops as we approach Christmas.

So whilst this may be a cautious and timely decision, the question remains: What next?