Interest Rate Rise ‘in August 2016’: Will it really happen this time?
14 Aug 2015 | COMMENTS: 0 | Author: Ryan Smith | General
With the national interest rate having now been set at just 0.5 per cent for over six years, predictions continue to flood in about when the Bank of England will raise the base rate.
The latest prediction from the market is that the first base interest rate rise will now not occur for another year, in August 2016. This is in stark contrast to what the markets were prediction just a few weeks prior, when rates were set to rise ‘as early as the start of 2016’, and some even stating that a rise was ‘imminent’.
This led to media articles advising homeowners to fix their mortgage rates in anticipation of a hike in their monthly payments, with lenders even removing some of their lowest fixed-rate offers.
But as the goal posts get pushed further and further for this supposed rate rise, should we even trust the ‘experts’ when they’ve been so historically wrong?
Even back in 2008, as rates were cut to 0.5 per cent, they were expected to rise back to around 5 per cent in the same year.
Since then, there have been predictions every single year telling us to expect a rise: around 3.5 per cent in ’09, ’10 and ’11; less positive in ’12 and ’13 when a rise to just around 1 per cent was expected; and more optimism last year and earlier this year, when we were set to expect a rise to around 2.5 per cent and 1.5 per cent, respectively.
Unsurprisingly, none of these interest rate rises ever came to fruition, so how much stock can we really put in this new ‘August 2016’ prediction? Even before this prediction they were forecasting a rate at 1.5 per cent in 2018 – will even that come to pass, or are we resigned to historically low interest rates for a whole decade or more?
While low rates are good for those holding unsecured debt (such as on credit cards), it can be detrimental to savers who aren’t getting anywhere close to the returns they used to be able to on their investments.
It’s not likely we’ll see an imminent rise, so hastily going out and fixing your mortgage rate for example, could mean you miss out if rates continue at the low levels they are. Right now we’re sticking by the phrase ‘we’ll believe it when we see it’.