The Bank of England is getting ready to announce the results of its review of the Base Rate in the coming weeks.
Any changes to the Bank's interest rate could have a major effect on people's personal finances. This is because the Base Rate is often used as a reference for how much you could be charged on paying back loans, mortgages, and savings accounts.
While most of the past year had seen a consistent rise in interest rates, this may soon change according to some insiders. In February, the Bank decided to increase the Base rate to 4 per cent - resulting in a rise of 0.5 per cent.
Here's everything you need to know about the upcoming Bank of England announcement which could have a direct effect on the economy...
When will the Bank of England change interest rates again?
The Bank of England reviews the base rate eight times a year. It is understood that the next announcement from these meetings will be made public on Thursday, March 23, 2023.
Why does the Bank of England change interest rates?
The BoE raises interest rates to ensure that inflation is brought down. The Bank's Base Rate is factored by the country's economical situation and it is up to the Bank to decide what will bring down the rate of inflation over the next few years.
However, the Bank cannot guarantee how high the Bank Rate will go. Similarly, it is hard for economists to predict how high it will go on March 23, but they can make an educated guess.
Will interest rates increase again?
While it's impossible to say for certain, early indications from insiders at the Bank of England show a positive outlook for March's Base Rate announcement. In February, the Base rate rose to 4 per cent while last December it rose to 3.5 per cent.
Prior to this, on November 4, 2022, it rose by 0.75 percentage points from 2.25 per cent. But, one of the Bank's nine policymakers, Swati Dhingra, said "overtightening" of interests will likely mean that it will not rise any further.
Ms Dhingra said: "Overtightening poses a more material risk at this point, through potential negative impacts from increased borrowing costs and reduced supply capacity going forwards.
“It risks unnecessarily denting output at a time when the economy is weak and deepening the pain for households when budgets are already squeezed through energy and housing costs. Recent research indicates the persistent scarring effects of deep contractions associated with monetary policy tightening and energy market disruptions, indicating the harmful consequences of overtightening.”
She added: “A prudent strategy would hold policy steady amidst growing signs external price pressures are easing, and be prepared to respond to developments in price evolution.”
However, other policymakers such as governor Andrew Bailey have hinted that rates may need to continue rising in order to keep wages and prices under control.
What will happen to my money if interest rates go up?
Interest rates will have a direct effect on those with a loan or a mortgage with a variable interest rate. If the interest rate goes up, you may notice that the cost of your repayment will go up as well.
However, if you're on a fixed rate, you won't see any changes to your payments until the end of your fixed period. If you're concerned about how high your monthly payments could go up, you can use a mortgage calculator to better prepare yourself.
Furthermore, if your saving account pays interest, you might see interest rates on your savings going up.
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