The Bank of England has raised interest rates to 5% which is the highest in 15-years which will make borrowing more expensive.
The banks monetary policy committee raised the base rate by half a percentage point on Thursday morning.
Chieu Cao, CEO of Mintago, said: “It already felt like we were on the edge of a cliff when it comes to Britons’ financial wellbeing, but yesterday’s inflation and today’s base rate hike will push many people over the edge and onto the rocks below.“
“Businesses need to be prepared – as much as their costs are rising as well, it’s their staff who are going to feel the harshest effects of high interest rates and the cost-of-living crisis. That’s why employees require considered, robust wellbeing support; support that is regrettably lacking among many employers at present.
“In truth, too many businesses still see financial wellbeing support as a ‘nice to have’, but it’s a necessity right now. Employers must recognise the detrimental impact that financial stress can have on employees’ productivity, mental health, and overall wellbeing, and provide them with the tools they need to manage their finances as effectively as possible.”
Mohsin Rashid, CEO of ZIPZERO, said: “After a year of being worn down by persistently high inflation, it seems that soaring interest rates could now deliver the knock-out blow to millions of Britons, with mortgage holders facing unaffordable repayments and even potential repossessions. Make no mistake: if interest rate hikes continue on this trajectory, defaults are set to soar.
“Throughout the cost-of-living crisis, households have found creative money-saving solutions everywhere, from food shopping, and energy usage, to monetising their own data. But households cannot fight this war on every front. The government must now conjure the same ingenuity and find creative solutions to support struggling households who are reading today’s news in the fear that their finances are going to be stretched beyond breaking point.”
James Blower, head of Savings at Zopa bank, warned, “With inflation remaining high, the Bank of England has increased the base rate, moving it up by a further 0.5 percent to five percent to help get inflation back to its two percent target.
“The base rate jump is an unwelcome increase for many, adding further pressure on mortgages but also more uncertainty to the economy with fears of recession, further price increases, and stagnant growth.”
Blower added, “Now is a good time for consumers who are looking to start saving to start doing so, or for those who haven’t seen their savings account’s interest rate rise to shop around for alternatives.
“As a rule of thumb, newer banks in the market typically offer higher interest yields than high street banks do; this means consumers can benefit from up to 16 times more interest if they switch now.