Economy

Greedy? Banks hike mortgage rates but delay savings account rise

Greedy? Banks hike mortgage rates but delay savings account rise”

The first interest rate hike for over 10 years will have just a "modest impact" on Northern Ireland families and individuals as the Bank of England ushers in gradual rises in the cost of borrowing.

Millions of borrowers on variable rate deals will be impacted by the decision, which will add around £15 a month to the cost of the average mortgage.

Mark Carney, the governor of the Bank of England, said in a news conference that with prices rising and spare capacity falling, inflation is "unlikely to return to the two percent target" without an increase in interest rates.

Most lenders are expected to announce rises in variable rate mortgages over the next few weeks. Lloyds Banking Group - which includes the Halifax and Bank of Scotland - said tracker rates would rise on 1 December.

"He said 'could, ' he did not say 'would.' That was not a prediction, nor has he ever given a firm prediction about interest rates".

Lloyds has also admitted that a rate rise was not on the cards for its 22 million current account holders, many of whom will use these accounts for building up cash savings.

Mr Broadbent's comments came after the Bank raised interest rates from 0.25 per cent to 0.5 per cent on Thursday - the first increase since July 2007.

Reiterating the MPC's position, Mr Broadbent said: "Given our outlook now we anticipate a couple more rate rises to get inflation back on track, while at the same time supporting the economy".

The milestone rate hike comes as the Bank cut its forecast for growth to 1.6% for 2017 from the 1.7% previously predicted, but held forecasts at 1.6% for 2018 and 1.7% for 2019.

"Banks did pass on the cuts to their depositors, and we expect competition to push it in the other direction".

Theresa May's official spokesperson said she wants to see the interest rate hike benefit savers. Some banks have already said they will increase on their savings products.

"For savers, they may see an increase on the rate paid on their deposits". "We would expect others to follow suit".

Nationwide, Skipton, Yorkshire and Coventry have all pledged to increase their savings rates by 0.25 percentage points from next month.

Explaining his vote to raise rates, Mr Broadbent said: "Following the referendum, sterling's exchange rate fell very sharply, that's pushed up import prices and with it the rate of inflation".



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