Interest rates strike an all time high in five years

The Bank of England has put into effect the increase of interest rates to 5%. Raising rates by a quarter of a percentage sent the rates peaking at an all time high in five years.

The bank raised the rates with the threat of inflation hovering over their shoulders. In the midst of the numbers reported from the Insolvency Service showing the intensifying number of people with debt troubles it came as no surprise that the rates were bound to rise.

The rates will cause a calming effect on the housing market by raising mortgage costs but will in turn prevent the bullying of inflation. This suggests a negative effect for investors but beneficial for savers. It is said to shave off 0.3% of economic growth come next year.

Home owners will not be the only to suffer; borrowers of personal loans will take the hit as well. Borrowers’ repayments are likely to ascend with the new rates. Businesses alike will be financially tried, especially firms looking to invest.

The inflation rate is currently 0.4% over the intended 2% target and is expected to rise yet again to around 2.7% by January. This has many analysts talking about expecting to see another quarter of a percent rise in interest rates around the launch of 2007.

http://www.myvesta.org.uk