Today, Mark Carney is expected to announce an interest rate rise. Whilst not official, yet, Mr Carney gave the strongest signals to date that he would be increasing rates.

This will have an immediate impact on those with tracker mortgages or on a standard variable rate with their mortgage, leaving those in a fixed rate unaffected for the moment.

The Telegraph Reports

  • Bank of England expected to increase interest rates for the first time in a decade today; base rate expected to rise from 0.25pc to 0.5pc
  • Decision due at 12pm along with the central bank’s inflation report; Mark Carney will give a press conference shortly after the decision
  • Bank of England last hiked interest rates in July 2007; interest rates fell to historic lows to help the UK economy recover from the financial crisis
  • Pound steady on the currency markets ahead of the decision, remaining in flat territory at $1.3260 against the dollar

In effect, Mark Carney will be looking to reverse his post-Brexit adjustment of interest rates and return them to the previous 0.5pc, which will be welcome news for savers and less welcome news for those borrowing.

Whilst interest rates are this low, it’s a good time to borrow if you need to.

The Brexit Effect

Unfortunately, whatever way you look at it, the impact of Brexit is clear to see. The uncertainty surrounding talks with Brussels is having an impact and until we know exactly where we stand, times will remain to be ‘uncertain’ but all indications are, that interest rates will rise, albeit slowly.

Construction PMI reaction: Commercial and civil engineering will struggle until progress is made in Brexit talks

The Construction PMI survey masks how poorly the sector is doing.

The housing activity index climbed to 53.5 in October but the commercial and civil engineering sectors are still in contraction territory.

Pantheon Macro’s UK economist Samuel Tombs explained that the two lagging sectors “likely will remain underwater” until “decisive progress is made in Brexit negotiations”.

He added:

“Confidence in the outlook for the next 12 months, however, deteriorated sharply in October, and to its lowest level since December 2012. As a result, the most intense phase of the downturn in the construction sector might still lie ahead.”

Historic Interest Rates

The last time the Bank of England hiked interest rates was in July 2007, when Gordon Brown had just become prime minister, but the financial crisis forced the central bank to cut rates to their lowest in history, and have remained there since March 2009. Will the 2nd November 2017 be the beginning of the end for low-interest rates in the UK?

Markets await first Bank of England interest rate rise in a decade

Mark Carney expected to increase rates at noon

‘Relative Near Term’ Increases

Mark Carney has hinted before but last month was his strongest suggestion rate rises were on the cards and that it was time for the bank to “ease its foot off the accelerator”.

Policy Committee Meeting is being held today, 2 November 2017

It isn’t surprising but the governor has warned homeowners regarding “reckless” household borrowing in light of low-interest rates. It’s important to ensure you only borrow what you need and what you can afford, however tempting it might be with low-interest rates that we see today.

He said that while overall lending to UK consumers had come down markedly since the financial crisis, there was a danger from rapid “frothy” growth in some areas of household borrowing.

“What we’re worried about is a pocket of risk – a risk in consumer debt, credit card debt, debt for cars, personal loans,” he told BBC Radio 4’s Today Programme.

He said banks had “not been as disciplined as they should be” in their underwriting standards and pricing of this debt. No change there then!

‘Limited and gradual’

Pressed on when the Bank was likely to raise interest rates, a move that would make borrowing more expensive, Mr Carney confirmed the latest analysis from the Bank of England’s Monetary Policy Committee.

“If the economy continues on the track that it’s been on, and all indications are that it is, in the relatively near term we can expect that interest rates will increase,” he said.

Low Unemployment Figures

Recent low unemployment figures and stronger inflation have made a rise in rates more likely. This will have an immediate effect on borrowing, making it more expensive.

Changes to the Banking System

The Bank Governor also responded to comments from former shadow chancellor Ed Balls and former prime minister Gordon Brown that there should be changes to the way the Bank of England cooperates with the Treasury to ensure financial stability.

Mr Carney rejected suggestions that reform was needed, arguing the system was “incredibly well designed” with the Bank’s current role of identifying and highlighting risks to the economy, but with the big decisions resting with the government.

Update: post Noon Announcement on the 2nd

As forecast, interest rates have indeed risen, returning to their pre-Brexit level of 0.5pc.

The Bank of England has raised interest rates for the first time in a decade to head off rising inflation putting the squeeze on UK households.

  • Bank of England increases interest rates for the first time in a decade in order to curb high inflation squeezing UK households
  • Pound plunges on currency markets on dovish commentary from the central bank; down 1.2pc to just above $1.31 against the dollar
  • Base rate lifted from a record low of 0.25pc to 0.5pc; Mark Carney’s press conference reaffirms dovish perception on the markets
  • Bank of England last hiked interest rates in July 2007; interest rates fell to historic lows to help the UK economy recover from the financial crisis

The central bank’s Monetary Policy Committee voted 7-2 in favour of increasing the base rate from 0.25pc to 0.5pc.

However, the pound plunged on currency markets as traders interpreted the MPC’s commentary as indicating that another rate rise is off the table for the foreseeable future.

The minutes from the MPC’s meeting indicated that the central bank is in “no hurry to raise interest rates again and that further increases will be limited”, EY ITEM Club’s chief economic advisor Howard Archer said.