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Will interest rates finally go above 2009 levels this year?

The Bank of England kept interest rates on hold at 0.5% in a unanimous vote last Thursday. But could they be going up soon?

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Last week the Bank of England (BoE) voted against a rate rise, but dropped strong hints that rates would rise faster than previously expected.

If the BoE does put up  rates, it would be the first time that the base rate has gone above 0.5% since 2009, when it was taken down to a historic low in the aftermath of the financial crisis.

There was a rate rise back in November, but this was more of a readjustment after the BoE took the rate down to an unprecedented low of 0.25% as a calming measure after the unexpected outcome Brexit vote.

While this news took the pound up a bit, and will excite savers who have been suffering with low rates for many years, it should be a point of concern for those with large mortgages or other debts, who might see their costs rise.

Could you afford your mortgage if your rate goes up?

Use our rate rise calculator to see what could happen to your mortgage repayments.

Learn more

When could interest rates rise next?

It’s not yet clear when the BoE will put the rate up, but unless things change it’s likely to be sometime this year.

The Monetary Policy Committee (MPC) of the BoE meets on the first Thursday of each month, to discuss what to do with the base rate and publish the monthly inflation report.

So it’s worth keeping an eye on the news around these date if you’re worried about the rate going up.

Why would interest rates rise?

In a word; inflation. Prices are rising across the whole economy so traditional economic logic would require the rates to go up in response.

And while the pound is still at lows pushing up the price of imports to the UK. It’s not all bad news, the global economy is growing at its fastest pace since 2010.

The BoE explain the UK’s export trade is benefiting from “robust global demand and the past depreciation of sterling”, and “high rates of profitability, the low cost of capital and limited spare capacity”  support investment.

However, this does mean the inflation rate is getting nudged a bit too far above the BoE’s targeted rate of inflation of 2%.

How will a rate rise affect you?

If you have a mortgage on a variable rate, or with a fixed rate deal about to expire, your payments will likely go up. We’ve built a calculator so you can look at this.

Could you afford your mortgage if your rate goes up?

Use our rate rise calculator to see what could happen to your mortgage repayments.

Learn more

Credit card APRs might rise, and the available deals for 0% credit might become shorter, we’re already seeing the longest 0% deals be shorter than they were last year.

However, it should be good news for savers who have been suffering with low interest rates paid on their deposits for almost ten years.

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