Interest rate rise 2017 LIVE: Bank of England hikes rates to 0.5% – what it means for YOU
INTEREST rates rose today to 0.5 per cent today - the first rate rise for more than a decade.
Mark Carney details decision to increase interest rates
It is first time rates have increased since July 2007.
Today's hike sees the level rise from 0.25 to 0.5 per cent.
It comes after the Bank's Monetary Policy Commitee in September signalled an increase "over the coming months".
But charities and business groups have warned against such a hike saying it would put pressure on both companies and homeowners.
See below for live updates ahead of the midday announcement.
Those with variable rate mortgages will also be hit by the hike. Around one in 10 households are currently using the mortgage type.
See live updates below
LIVE UPDATES:
2.30pm: Read the full list of who the banks and building societies reacted here.
1.58pm: Banks have reacted. Yorkshire Building Society said its boosting its variable rate accounts by 0.25 per cent.
But some of its mortgages will also raise b the same amount.
TSB said its variable rate mortgage and base rate linked credit card would increase by 0.25 per cent.
HSBC's tracker mortgages will increase Friday in line with the interest rate hike. Others will be reviewed.
A statement from HSBC said: "As tracker mortgages are directly linked to the base rate, these will go up in line with base rate as of tomorrow.
"On average, those with an HSBC tracker mortgage with £100,000 balance would see a monthly increase of £12 per month and an increase of £24 for those with a £200,000 outstanding balance."
1.45pm: And what does the rise mean for SMEs?
Phil McHugh, Senior Market Analyst, Currencies Direct, said the news was not welcome.
He said: “This will be disappointing for importers who would benefit from a stronger pound and for whom the immediate 1% drop in sterling’s value after the announcement will feel counter-intuitive.
“The hike reverses the emergency rate cut post the Brexit vote - so if Brexit does hit hard it offers them some room to manoeuvre. We are not likely to see a further hike for some time leading to any pound momentum hitting a wall.
1.35pm: Mr Carney admitted the decision to raise interest rates for the first time in 10 years "creates some uncertainty" as he assured the impact will be "no larger than usual".
The BoE governor said households are "generally well positioned for a rate increase" with more people in work than ever before, adding the majority of mortgages holders have dealt with interest rate increases before.
He said: "Fully 60% of mortgages are now at fixed interest rates. Even with this Bank Rate increase, many households will re-finance onto lower interest rates than they are currently paying by around 30 basis points for those moving from an expiring two-year fixed rate deal to around two percentage points for someone refinancing an expiring five-year fixed rates deal."
1.15pm: Deputy governor Ben Broadbent has said we're all getting too excited about rate rises.
He said pre-crisis interest rates would move every four months.
1.08pm: Vince Cable now speaking to Sky News.
He said although it is a "tiny increase" if "interest rates continue to rise it is going to have a serious affect on households and businesses who are reliant on borrowing."
1.07pm: Sterling has fallen 1 per cent against dollar and 1.25 per cent against euro.
David Lamb, head of dealing at FEXCO Corporate Payments, said: “Mark Carney’s press conference talked of any future rises being ‘gradual and limited’, but the markets’ conclusion has been more blunt – ‘one and done’.
“So the net effect has been to deliver a beating for the Pound, which is now losing the gains made as it soared on the pre-hike hype.”
1.05pm: Simon Phillips, retail director at No1 Currency said: "Rates rise and Sterling sinks - Sterling has been on the up all week as the currency markets anticipated today’s rate rise, but it has dropped off a cliff after the immediate announcement today.
“This is unexpected because usually higher UK interest rates mean a greater demand for sterling from foreign investors - which typically drives up the value of the Pound.
“But although there was a rise the Bank reverted to a very dovish position. In fact, the Bank has altogether dropped its line that interest rates may rise more quickly than markets currently expect and reverted back to saying rises will be gradual and limited. That suggests there won’t be another rate rise until this time next year at the earliest.
"The Eurozone’s economy is growing significantly faster than Britain’s, which also adds to the poor exchange rates against the Euro. Sterling has been through swings and roundabouts and more uncertainty lies ahead."
1.01pm: Mr Carney said the "worst" of the income squeeze hitting British households is ending.
In justifying the rate rise, he said: "This is part of ensuring that it (the income squeeze) doesn't come back and ensuring that inflation comes back to the 2% target in a sustainable manner."
When asked at the press conference if this was the start of a rate rise cycle, Mr Carney said the forecasts show that two more rises are needed to return inflation to target.
He added that savers were expected to benefit from the rate rise.
He said: "Banks did pass on the cut to their depositors and we expect competition to push it in the opposite direction.
"We'll watch it closely."
12.59pm: Regarding how the UK sits on the world stage, Mr Carney we were “participating a little less” in the global upswing.
However - some good news - he says the rate increase should see a positive impact on wages.
12.58pm: Mark Carney said: "Brexit effects on Britain are two fold - less investment and productivity although both will depend on what transition arrangement is negotiated.
"I would reinforce that this is a trend that has been there for a while and didn’t just start last summer."
12.51pm: Homeowner update - Today’s base rate rise is a new experience for the estimated 2.6 million home-owners who have only ever seen static or falling rates after getting on the property ladder in the past decade.
Years of low rates mean mortgage costs have reached record lows.
Fixed-rate deals cushion borrowers against any immediate impact of a base rate increase.
More than nine in 10 (94%) new mortgages taken out in the second quarter of 2017 were fixed-rate, according to trade body UK Finance.
12.49pm: The Bank governor added another note of caution at today’s announcement regarding the future.
He said: "It's not so much where inflation is now, but where it's going that concerns us.
"In many respects the decision today is straightforward: with inflation high, slack disappearing and the economy growing at rates above its speed limit, inflation is unlikely to return to the 2% target without some increase in interest rates."
And, again on Brexit, he added: "Of course, these are not normal times. Brexit will redefine the UK's relationship with our largest trade and investment partner.
"If there is resolution of some of the big questions around Brexit, transition deal, you would expect that to affect how the economy works and you would expect that to change the economic outlook and you would expect that to recalibrate monetary policy...I would caution the consequences of resolution on Brexit are not automatic."
12.48pm: Interest rates rise will be a bonus for savers. On savings Mark Carney said he expects banks to pass on the benefits of the interest rates to savers.
12.47pm: On Brexit Carney added a future deal would affect the economy. And monetary policy would have to be nimble.
He added: “Consequences on Brexit are not automatic on the path of inflation.”
12.45pm: Two additional rate increases have been mapped out over the next 6 months.
12.43pm: As people struggle make ends meet Mark Carney was questioned over his decision to raise interest rates.
However Carney said: "More people than ever before are in the labour market, the degree in spare capacity in the economy is limited.
"The rate of productivity has been very slow since the crisis. What we’re doing is easing our foot off the accelerator. It will have an impact on borrowers and it will have an positive impact on savers."
12.37pm: The Bank of England monetary policy summary read: "Monetary policy cannot prevent either the necessary real adjustment as the United Kingdom moves towards its new international trading arrangements or the weaker real income growth that is likely to accompany that adjustment over the next few years.
"It can, however, support the economy during the adjustment process. The MPC’s remit specifies that, in such exceptional circumstances, the Committee must balance any trade-off between the speed at which it intends to return inflation sustainably to the target and the support that monetary policy provides to jobs and activity.
12.35pm: In the stress tests the Bank of England claimed households are well positioned to deal with a rate increase. More people are in work and Britons can withstand a increase to mortages by 7 percentage points.
12.34: Mark Carney blames Brexit for interest rate increase. The Bank of England briefing read: "The decision to leave the European Union is having a noticeable impact on the economic outlook.
"The overshoot of inflation throughout the forecast predominantly reflects the effects on import prices of the referendum-related fall in sterling. Uncertainties associated with Brexit are weighing on domestic activity, which has slowed even as global growth has risen significantly.
"And Brexit-related constraints on investment and labour supply appear to be reinforcing the marked slowdown that has been increasingly evident in recent years in the rate at which the economy can grow without generating inflationary pressures."
12.29pm: Speaking now Mark Carney said the decision was "straightforward".
He added "business uncertainty had been affected by Brexit".
Mr Carney said: “Interest rate increases make it more attractive to save today and consume tomorrow.”
He added “households were well-positioned for an increase” but said future increases would be gradual.
12.28pm: Businesses will also lament the rise.
Roy Williams, managing director at management consultancy, Vendigital, said: “The impact on mortgage repayments will knock consumer confidence and this could impact spending at a critical time in the retail calendar, when many shops and hospitality businesses are taking on extra inventory or staff for Christmas.”
12.24pm: However, Ross Boyd, founder of online mortgage platform, Dashly.com, said it will put millions of mortgage borrowers under increased financial pressures just weeks before Christmas.
He said: “At a time of low wage growth and high inflation, this interest rate rise will rub salt to the wound for many households, especially those on standard variable rates.
“While many will cope with this small increase in mortgage repayments, it’s what it represents that could have the largest impact.
“For now, the pressure is arguably less financial than psychological.
“While another rate rise is unlikely for the foreseeable future due to economic uncertainty and Brexit, now might be a good time for people to review their finances to see if there are better mortgage deals available.”
And Lea Karasavvas, managing director of Prolific Mortgage Finance, said the Bank had no choice but to increase rates.
She said: “The Bank faced a terrifying loss of confidence if it balked again, after one of the most hyped run-ups to a rates decision in history.
“The market, convinced it was coming, had already voted with its feet. The pound had climbed, swap rates had risen and every lender bar Nationwide had increased interest rates in anticipation.
“Historically, inflation of 3% has been the magic number to trigger rises and this has been borne out again.”
12.22pm: Vince Smith-Hughes, retirement expert at Prudential, said it was good news for pensioners. “Rising interest rates will be welcomed by retired people who often have a large proportion of their savings in deposit accounts.
“Rising inflation has eroded their retirement income as deposit accounts fail to keep pace with inflation.
“The rise in interest rates will hopefully see better returns from savings accounts. Using the right wrappers to minimise tax is also important.”
12.12pm: Mark Posniak, managing director, Octane Capital, played down the rise.
He said: "Given the near hysterical build-up to this first interest rate rise in a decade, you'd think rates were going up to five per cent and the future of the UK economy was at stake.
"Rates have simply gone back to a level that itself was an all-time low for the best part of a decade.
"What the Bank has effectively done is send up a flare, announcing to homeowners and businesses that the artificial rate environment we have been in for so long will, at some point, come to an end, especially with inflation as high as it is.”
12.08pm: Policymakers on the bank's nine-strong Monetary Policy Committee (MPC) voted 7-2 in favour of the quarter point rise, which marks the first rates increase since July 2007.
The move comes as the bank looks to dampen Brexit-fuelled inflation, which it predicts will now peak at around 3.2 per cent this autumn.
The Bank's quarterly inflation report also suggested two more rate hikes were likely over the next three years to return inflation back to its two per cent target, which could see rates hit one per cent by the end of 2020.
12pm: Bank of england ANNOUNCES interest rate rise to 0.5 per cent from 0.25 per cent
11.50am: Monetary Policy commitee consists of:
Mark Carney - Governor, Ben Broadbent - Deputy Governor, Monetary Policy, Sir Jon Cunliffe - Deputy Governor, Financial Stability, Sir David Ramsden - Deputy Governor, Markets and Banking, Andrew Haldane - Executive Director, Monetary Analysis & Chief Economist, Ian McCafferty - External member, Michael Sauders - External member, Silvana Tenreyro - External member, Dr Gertjan Vlieghe - External member
11.42am: As we are 11 minutes away the pound has dropped by half a cent agaisnt the dollar to $1.319.
11.32am: Professor Michael White, a mortgage finance expert at Nottingham Trent University has made it clear that he believes now is not the time for an interest rate rise. He has said on the matter: "I think that it is a bad time for a rate rise. Inflation has come from the fall in value of sterling due to the brexit vote.
"A rate rise would hit ordinary working families who are already experiencing falling living standards as their wage rises have fallen behind inflation."
11.02am: With an hour to go, it is worth noting that DailyFX Team predicted a rise in interest rates to be at 90.1 per cent.
10.53am: Currently the pound is rated at $1.32 as the U.K. prepares for the Bank of Engalnds interest rate announcement, just over an hour away.
10.46am: Richard Theo, CEO of online investment firm Wealthify, explains:
"Today’s long-awaited rate rise may seem like welcome news for UK savers, but it will be a double-edged sword for many Brits, giving slightly better cash savings returns with one hand, then taking them away in the form of higher debt repayments, with the other.
"Savers should check their sums before celebrating. Assuming all the benefits of the rate rise are passed on to the consumer, which is by no means a given, a 0.25% increase will give a saver with a £20k pot just £50 extra per year in returns."
10.16am: Variable-rate mortgage homeowners will see an instant hit to their capital if the bank of England do in fact raise rates today. Still, that lies at only one in ten households in the U.K. in contarst to around 20% a decade ago.
9.42am: Markit's construction PMI has increased from 48.1 to 50.8 per cent. This shows an increase in activity, however, British construction is now at its lowest level since December 2012.
9.31am: Protest group, Posiive Money has formed outside the Bank of England, a not-for-profit organisation that "isn't reliant on housing bubbles, stock market booms and unsustainable levels of inequality and debt to keep it growing".
9.25am: Markets say there is a strong chance of an interest rate rise.
DailyFX Team Live sets the probability at around 90 per cent.
It wrote on Twitter this morning: “Overnight index swaps are pricing in a 90.1% probability that the Bank of England will raise rates later today.”
9.10am: The pound is currently around the $1.326 mark this morning as the City readies itself for the big interest rates announcement.
A hike in the rates from the Bank of England could see it rise, while no change is likely to result in the pound dropping.