Monetary policy affects households and the economy in many ways, but the direct impact of higher rates on household cash flows is thought to account for around a quarter of the total impact of rate rises in the UK. [...] Rising net interest income is the result of slow pass-through to mortgage rates… A defining feature of this most recent rate-rising cycle has been the slow and gradual pass-through of increases in the Bank of England’s base rate to higher mortgage rates for families. [...] …but the size of the income boost has been magnified by improved household balance sheets The size of the boost to net interest income as a result of differential changes in rates depends crucially on the health of household balances sheets. [...] The grey swathe reflects significantly uncertainty around the outlook for instant-access savings rates; the dotted line is the average of the top and bottom of the swathe. [...] For time deposits – including a minority of cash ISAs – we use aggregate Bank of England data on the stock of outstanding fixed-term bonds, and the average quoted rates on new fixed-term bonds in recent years, to estimate the evolution of the average rate on the stock of fixed-term bonds over the coming year.
- Pages
- 11
- Published in
- United Kingdom
