Posted by Allison on 6 October 2009, 10:50
Way back in April last year, the interest rate as set by the Bank of England was 5%. But since then it has dropped and dropped, and kept on going in that direction.
The rate has been lower than 5% before of course. It fell to 3.5% in July 2003, but it didn’t fall any lower than that beforehand. If you want to know how the interest rates as set by the Bank of England have gone up and down over the years – ever since 1975 – you can go to their website to read them all. You will find them all on this page.
But it fell below 3.5% in November last year, and since then it has dropped right down to just 0.5% - which has never been set before – in March 2009.
It has stayed at this rate for some time now, but how has this all time low interest rate affected us when it comes to money?
Well you may have noticed your mortgage payments coming down slightly, depending on what plan you are on. Low interest rates should also encourage people to spend, but with the weakness of the pound that doesn’t seem to have happened in quite the way some people expected.
For example, we aren’t likely to head off on holiday because your currency calculator won’t give you a great exchange rate with practically any other currency in the world. And even if it did there is a chance we wouldn’t be converting our pounds anytime soon. This is because we are all too worried about our jobs and our income to be brave enough to spend money on a holiday that could be postponed.
So what does the future hold for us? This country clearly has money issues, and these stem from more than one place. The government has put the country into a huge amount of debt for starters. And individually many of us have huge bills and credit card payments from the era of ‘spend, spend, spend’ that refuse to go away. It isn’t surprising that people are deciding to spend a shorter holiday in this country if they are considering taking one at all.
Obviously the interest rates will start creeping back up again at some point. But when will that point be? At the moment it seems as if they are poised to consider a 0.25% rate; indeed some commentators have speculated on whether this could still occur. Who knows? Only those behind closed doors at the regular Bank of England meetings know the answer to that one, and whether it is even a possibility or not.
At any rate – if you will pardon the pun – it will be interesting to see how things develop in the near future. The pound is stronger against its rivals than it has been in the past, although it still has work to do to regain the highs it once had. In addition to this the economy in the UK is still far from how we would ideally want it to be.
But then, with a recession still taking hold and affecting so many parts of our lives, we can only expect things to get worse before they get better. The only question is where on the scale we are at the moment.