Rates have not been raised for ten years however in a series of comments earlier this year, the Bank of England hinted that there may be an interest bearing pot of gold on the horizon. However, the latest official data has scorched those hopes, as the economic outlook including consumer spending and business investment has dampened.
So why are interest rates still at an unprecedented low level, 9 years after the Financial Crash?
The answer is all down to the measures the government and Monetary Policy Committee put in place, to try and stimulate the economy. To put it into layman’s terms, low interest rates ultimately means low debt repayments. Home owners have smaller mortgages, loan holders have smaller repayments, and most importantly, businesses can afford to borrow. With all this free money, consumers and businesses are encouraged to spend spend spend! More spending means that profits are up, confidence is high, and we are now out of the recession and everything is running perfectly!…. ‘Wait’, I hear you ask, if everything is magically sorted by our 0.25% base rate, why do we still always seem to have some message of Doom and Gloom in the papers?