Will the Bank of England increase interest rates?
Image source: Getty Images. The Bank of Englands Monetary Policy Committee is set to meet this week to decide what will happen to interest rates. Lets take a look. Plot your path towards financial freedom with our Heros Journey tool! MyWalletHero is here to help you learn about taking control of your money, whether thats paying off debt, working towards a short-term money goal, or investing for your future. This tool can help you understand the next steps on your journey  simply choose a goal that best describes your current interests to get started. Interest rates have remained at record lows for the past year. In an effort to support households during the Covid-19 pandemic, the base rate was reduced to just 0.1%. However, each month the Monetary Policy Committee (MPC) decides whether interest rates need to change. The committees aim is to meet the governments target to keep inflation below 2%. And in May 2021, inflation in the UK crept up to 2.1%. This has led some to speculate that we could be heading for a rise in the base rate in order to combat increasing inflation. At the time of writing, this is unlikely to happen. The Bank of England doesnt think that the UKs economic recovery is embedded enough to warrant this type of move just yet. If the UK economy continues on this trajectory, then some economists see inflation exceeding 3% later this year. The Bank of England forecasts it will be more like 2.5%. Either way, it will be above the 2% target. Not many think that interest rates will rise this year. But there are quite a few who think it will happen in 2022. In fact, Bank of England policymaker, Gertjan Vlieghe, said he expects rates will need to rise in late 2022 if the economy grows as expected. 4 iron-clad rules for saving money on everything Our Editor Sam Robson has been on a personal cost-cutting mission for years  and its time to share his wisdom. Check out his choicest saving tips and tricks in this free report, Sams 4 Iron-Clad Rules For Saving Money On Everything. Just enter your email below for instant access to your free copy. Click here! The interest rate set by the Bank of England typically dictates the cost of borrowing, and how much you can earn on your savings. The base rate is what the Bank of England charges other banks and lenders when they borrow money. So it usually has a direct impact on the interest rates available on the high street. If you borrow from a bank, the base rate influences the interest rates the bank will charge you for borrowing. And if you save with a bank, it is what they will pay you for allowing them to use your money. So, if the base rate was to rise, we may see the return of competitive cash savings accounts. However, borrowing may become more expensive. This will particularly be the case if you are on a variable rate mortgage, as your rate will probably rise in line with the base rate. If interest rates rise, then its worth doing a financial health check. If not, it may be time to shop around as there could be better deals available. Mortgages  If you think interest rates are set to rise, it could be a good idea to get yourself on a fixed-rate mortgage while they are still low. Your rate would then be fixed for a set period of time, protecting you from any base rate increase. Other debt  Credit card interest rates are notoriously high anyway. So the main thing to beware of is leaving a balance on a card. If you dont pay off your balance in full each month, you open yourself up to costly interest charges. Meanwhile, if you already have a personal loan, the likelihood is that you are already tied into a repayment schedule. But if you are shopping around for a loan, make sure you compare like for like to get the best possible deal. Get a free initial review lasting up to 1 hour, plus 50 off any follow-up advice. MyWalletHero has sourced you a 50 discount off the cost of advice when you find an independent or whole-of-market financial adviser through Unbiased.co.uk*. All advisers are FCA-regulated, qualified and give fully unbiased advice. To find yourself an adviser fast and for free  use the Unbiased matching tool. Find an adviser now! *This is an offer from one of our affiliate partners. For more information on why and how we work with partners, click here.