As the Bank of England hikes interest rates by 0.5%, here are some thoughts from around the industry as to what it means for people’s personal finances.

Chieu Cao, CEO of Mintago, said: “Today’s BoE decision will do little to help the Britons who are struggling in the midst of the cost-of-living crisis. In the current climate of soaring inflation, driven largely by skyrocketing food and energy costs, saving money has also become increasingly difficult. Not all savings accounts will reflect the changes to the base rate, and it still will not come close to the rate of inflation. Meanwhile, those with debts, particularly mortgages, will likely see their repayments increase. “We’re living through very challenging economic conditions right now. As such, it’s more important than ever that people feel able to voice their concerns about their situation and empowered to take control of their finances; and this needs to happen in the workplace, where not enough is being done. “By providing their staff with better financial support – whether that is advice or platforms that help them manage their finances – employers can do a lot to alleviate the stress many people are facing. Reviewing salaries is one thing, but bosses need to see the bigger picture. Can they help their employee get a clearer idea of their overall financial situation and make more informed long-term decisions about their finances? This would make a huge difference and I would urge organisations of all sizes and sectors to consider how they are helping with their staff’s financial wellbeing at this critical time.”

Richard Eagling, personal finance expert at NerdWallet, said:“A more drastic hike in the base rate shows just how keen the Bank of England is to reign in runaway inflation. But, for many households, it will only heighten financial anxieties. Borrowers will have to prepare themselves for the likelihood of increased repayments, such as higher mortgage rates. And with inflation predicted to continue rising throughout the year even with interest rate hikes, many consumers will be understandably concerned about how they can afford to make repayments on top of everyday bills.“So, individuals must waste no time in taking measures to prepare themselves. Keeping track of all incomings and outgoings will be critical in helping them identify potential issues or pinpoint areas where savings can be made.“Meanwhile, checking the terms of existing mortgages and exploring alternative lenders to switch to might be the right step for some homeowners. At the same time, they could use comparison websites and mortgage calculators to compare different mortgage deals and consider switching to a provider with a lower interest rate. However, these options could come with early repayments or exit penalties, so understanding the terms and conditions is crucial before making any such decisions.“These remain difficult times for borrowers, and the situation is unlikely to improve in the near future. That said, people must remain calm and take stock of the options available to them so that they can take as much control of their long term financial situation as they possibly can.”

Andrew Megson, executive chairman of My Pension Expert, said: “Another interest rates increase – particularly a more significant jump than previous ones – would usually be good news for pension planners, improving the performance of their savings. In reality, any improvements in the interest earned on savings will be dwarfed by inflation, which is only going to rise more steeply in the months to come.“Make no mistake, the current economic climate is very difficult to navigate and the consequences are far-reaching. Over-50s are coming out of retirement in their thousands (7% of over-50s in work currently have “unretired” in 2022, according to My Pension Expert’s latest research) due to the cost-of-living crisis. Many more will be worried about their financial futures.“It is so important right now to refrain from making any rash decisions that could later damage a person’s financial security. Where pension planning is concerned, in times of economic uncertainty it’s crucial to first review your retirement strategy. Likewise, a sensible move would be to speak to an independent financial advisor to explore all options available, whether that’s annuities, flexible-access drawdowns, or riskier investments that could offer more favourable returns in the face of inflation. There is no one-size-fits-all solution; it’s about finding the right approach for your circumstances and your needs.”

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