Today, Thursday 2 February 2023, The Bank of England have again increased interest rates, this time to 4%. Another milestone of the highest rates in 15 years.
Chancellor Jeremy Hunt stated, “Inflation is a stealth tax that is the biggest threat to living standards in a generation, so we support the Bank’s action today so we succeed in halving inflation this year.”
Why are interest rates continuing to increase and when will the increases stop?
The Bank of England are increasing interest rates to battle inflation, which is currently at 10.5% with a target of 2%.
By increasing interest rates, it makes borrowing and debt more expensive, leading to those who borrow or have debts being able to afford less due to higher repayments, then in turn spending less.
By spending less, products are less in demand, reducing their cost, which then eventually reduces inflation.
The reason for inflation spiralling out of control came from when the World returned to normality after the pandemic; products and resources were high in demand, which left little product and resource available, then pushing prices much higher than pre-pandemic.
Rates are expected to continue rising as inflation is continually battled in 2023, with an expected peak of 4.5% this coming Summer as the BoE are keen not to halt the growing economy.
What this means
Individuals and businesses alike with any kind of borrowing, will begin to feel the squeeze when it comes to new borrowing or repayments.
Loans, mortgages and credit cards will be hit by the increase instantly, making it harder to afford borrowing and make repayments.
As continually suggested, both individuals and businesses are being advised to spend less and save where possible.
How can you cut costs in your business?
Read our earlier blogs on Business Savings During the Cost of Living Crisis and The New Energy Bills Discount Scheme, http://www.seavorchartered.co.uk/cost-of-living-crisis/#more-6162, http://www.seavorchartered.co.uk/the-new-energy-discount-scheme/
How we can help you
If you’d like to discuss your finances and our services we can provide to support you through the cost of living crisis, call us on 01228 904904 or pop us a message at mail@seavorchartered.co.uk.
