From December 2021, the interest rate is increasing rapidly. So far, this has been recognized as the 08th consecutive interest rate hike. In the recent past, it has been found that till September 2022, the interest rate has increased by 00.5%, thus taking the total interest rate to 02.25%.
A statistical calculation suggests that the interest rate may increase by 04.75% by the next year, 2023. Even if interest rates are rising aggressively, however, the effect can be said to be indirectly proportional.
UK banks are trying to control the rate of inflation by charging higher rates. This is because after covid the prices of everything have increased wildly. Due to this many sellers are facing difficulty in selling their products, resulting in huge loss of capital.
With high prices, people are trying to avoid luxuries, buying limited essentials. Even for some, the necessities of shopping have been a quiet struggle post-Covid as many have lost their jobs due to the recession.
Due to such a crash, recently, it has also been seen that a large proportion of people are taking loans to balance their current problems. Therefore, a thorough analysis was done keeping the whole situation in mind.
Based on the overall analysis, UK banks decided to raise the interest rate to control the inflation rate. According to him, if the interest rate rises, people will borrow less and spend wisely.
Many banks in UK have taken this step because according to their perception, UK may enter into recessionary period for at least 02 years. Therefore, this remedy is chosen by many.
The move is necessary and challenging to balance because banks do not want the UK economy to slow down. Since 2008 has been a year of global recession, the world has been part of dark economic times. After which the interest rate in Britain had gone up to 00.1%.
With the sudden increase, the UK banks are trying to not only stabilize the situation but also try to mitigate the impact. Upon closer examination, it is found that the UK economy has been affected recently as prices in other countries are getting higher.
So, to ease the tension and handle the situation, the Bank of UK is constantly trying to avoid inflation rates. Also, it is observed that between early 2024 to mid-2024, there will be an increase in home loan rates.
As per the official report, it has also been found that the mortgage loan interest rate will increase to 04.5% during the first quarter of 2028.
If seen carefully, the rates have been increased in the banking and credit sector for a reason. If rates are higher in these areas, the monthly interest payment will also increase.
With interest rates so high, most UK residents would avoid taking out a loan. Therefore, it would prove to be a beneficial act for the UK and the population of the UK.
This is because, if there is a recession, more than half of UK residents will be unemployed. This will trigger a big nightmare for the citizens of UK as during and after covid, a large number of people faced unemployment situation.
So, keeping in mind the life and future of UK to avoid the worst possible scenario, banks have taken this decision. With the above facts, it is clear that interest rates in the UK will continue to evolve for years to help keep the UK economy afloat.
As of now, it is still to be determined when interest rates will be low again in the UK. However, the prospects in the future seem extremely limited and favourable!
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