THE BANK of England Monetary Policy Committee (MPC) yesterday raised interest rates for the first time in more than ten years.
The official bank rate has been lifted from 0.25% to 0.5%, the first increase since July 2007. The move reverses the cut in August of last year, made in the wake of the vote to leave the EU. Almost four million households face higher mortgage interest payments after the rise, but it should give savers a slight lift in their returns.
The main losers will be households with a variable rate mortgage. Of the 8.1 million households with a mortgage, 3.7 million, or 46%, are on either a standard variable rate or a tracker rate. According to UK Finance, the average outstanding balance is £89,000 which would see payments increase by between £11 and £12 a month.
The nine-strong MPC voted by 7-2 to raise rates, saying that falling unemployment means there is ‘limited’ slack in the economy. They contend that growth cannot accelerate much more without causing prices to rise more quickly. Trade union leaders slammed the rate rise.
Unison general secretary Dave Prentis said: ‘This rate rise adds insult to injury for public service employees suffering from years of wage freezes and limits on their pay. Spiralling debts and increased mortgage payments are the last thing hardworking public servants and their families need. They all deserve a decent pay rise that more than matches the rising cost of living. The Chancellor should show he understands the financial pressures they’re under and find the cash in the Budget to fund their long overdue pay rise.’
Tim Roache, GMB general secretary said: ‘An interest rate rise without a real pay rise is in reality an increase in hardship and worry. The rising interest rates will increase the costs for many working people, while pay is being squeezed and the economy is uncertain. People are already struggling to make their wages last until pay day and we’re already hearing about teaching assistants being forced to use food banks.
‘The government must now use its Budget to deal with the cost of living and starting with increasing people’s wages. The unjustifiable, cruel cap on public sector pay that has seen thousands pinched from front line workers over the last seven years must end.’
