Interest rates up for first time in ten years
Friday 3 November 2017
DR GORDON Fletcher, retail and finance expert from the University of Salford Business School, comments on the Bank of England decision this week to raise interest rates from 0.25% to 0.5%, the first such increase since 2007.
Dr Fletcher said: “The 0.25% interest rate rise today by the Bank of England is definitely not a surprise. As the first rise in 10 years there are a number of consequences for consumers and it potentially represents a turnaround of recent monetary policy where low rates have helped to ease the consequences of Brexit and the credit crunch. Unfortunately there are few positives to be found with this decision.
“Higher interest rates act as a brake on lending as the cost of borrowing increases. For businesses this will mean a reduction on growth as key decisions are taken ever more carefully. For consumers this translates into higher mortgage repayments, higher rents and more expensive loans including credit cards. This is at a time when household debt is already at its highest ever. All this means less spending on the high street (and online).
“The usual positives of a rate rise are also failing to materialise (at least immediately). Higher rates - even small ones - should produce a stronger pound against other economies - helping to reduce the cost of imports, making overseas holidays cheaper and encouraging international business growth. But wider nervousness around the political and economic position of the UK is currently counterbalancing any upswing.”
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Sam Wood
0161 295 5361
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