Bank of England chief hints at rate rise soon as year’s end

This should be good news for savers who have witnessed rock bottom returns over a six-year period in which the Bank base rate has stayed at 0.5%.

Governor Mark Carney said last week in a speech in Lincoln: ‘The decision to start such an adjustment will likely come into sharper relief round the turn of this year.’.

Inflation will still be below 1 per cent in January and February, Spencer believes, which is a long way below the target rate of 2 per cent.

So anyone on the hunt for a mortgage now should consider going for a fixed rate deal to guarantee repayments don’t rise. The rate was frozen at 2% from October 1939 until November 1951.

Carney added several factors may affect the timing and scale of the rate increases. Mark Harris of mortgage broker SPF Private Clients told the Guardian. “It probably won’t”.

The EY Item Club’s quarterly forecast, to be published tomorrow, is expected to predict that interest rates will not increase until the autumn of next year. But this might not bring a correlating rise in the rates paid on savings accounts.

Carney said: “Over a half of United Kingdom mortgagors would pay higher rates in a year’s time, and close to three-quarters of mortgagors in two years’ time, were interest rates to evolve according to current market rate expectations”. They argue that when BoE decreased base rates, the savings rates also started to fall.

People on variable rate tracker mortgages, especially those linked directly to the Base Rate, will be the first to feel the impact of a change.

Experts reveal that there has been a significant rise in banks cutting interest rate since summer 2012 when government introduced Funding for Lending scheme for banks, which ended banks’ dependence on savings deposits for capital.