No change for interest rates after election

Interest rates to remain unchanged

Interest rates look set to stay on hold at 0.5% today when the Bank of England announces its first post-election policy decision.

Rates have been at the historic low for six years and the slide in inflation to zero has pushed back expectations for the timing of a hike into 2016.

The Bank's Monetary Policy Committee (MPC) will announce its latest decision today, having met on Thursday - polling day - and Friday.

And later this week markets will focus on the Bank's quarterly Inflation Report giving its latest thinking on the outlook for the UK economy.

Wednesday will also see the publication of a second letter from governor Mark Carney to the Chancellor explaining why inflation is more than 1% off its 2% target. Inflation has continued to slide since the previous letter in February.

Both report and letter will be scrutinised for clues on the path for interest rates after minutes of the MPC's latest rates meeting appeared to indicate that inflation might recover more quickly than previously expected.

Consumer Price Index (CPI) inflation was at zero in February and March - rather than turning negative as some expected - meaning it might now have avoided this risk.

The Bank has said it expects CPI, which has been under pressure amid the sliding cost of oil and the supermarket price war, to turn negative "at some point the coming months".

However, members have noted that another cause of low inflation - the strength of the pound making imports cheaper - may have been feeding through to CPI more quickly than expected, meaning that a bounce-back could also come sooner.

A faster-than-expected rise in CPI would put pressure on the MPC to consider a rates hike in order to keep inflation under control further down the track.

However, Bank chief economist Andy Haldane has recently floated the likelihood of a rates cut to try to stave off a damaging spiral of falling prices - though he seems to be a lone voice among policymakers.

Mr Carney has acknowledged that the tool of a rate cut is in his armoury should deflation persist but has played down the possibility of having to use it.

Philip Shaw of Investec, said that after last month's "hawkish surprise" from the MPC minutes, the Bank's inflation report "could conclude that inflation will be slightly above the 2% target in two to three years' time".

10 things your bank doesn't want you to know
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No change for interest rates after election
Once you have opened a current account with a bank or other lender, you will get a steady flow of emails, letters (and maybe phone calls) offering you a savings account, loan, mortgage, ISA etc to go with it. But while it may be tempting to have everything in one place, it's better to do the legwork and shop around for the best financial products. You can compare interest rates on loans and savings accounts in the 'best buy' tables in the newspapers, or look online on comparison sites. Remember you can still easily transfer your money between accounts, even if they are not with the same financial institution. 
Whether you want to apply for a new mortgage or refinance an existing one, your bank will probably be very happy to give you an instant quote in the hope that you will go with them. They may not tell you that you can shop around at other lenders. A mortgage broker can give you an overview of the best interest rates on offer, and might be able to cut you an even better deal him/herself. 

Want to cash in your jars of change that are sitting on your shelves at home? Many banks are not very keen on coins. They often only take it from their own customers. You will have to sort it into different denominations and put the coins in the bank's bags in set amounts (for example, £1 for coppers, £5 for silver, etc). Some banks only take a limited number of bags a day, or won't take any at busy times. Others take a different view: HSBC has free coin deposit machines in many larger branches where you pour your jar of coins into the machine and it counts them and automatically credits your account. Barclays, NatWest and RBS also have machines in large branches in city centres.

Bank employees now have a duty to point out that they only advise on the bank's products and don't offer independent financial advice. What they won't tell you is that even the advice they give you about the bank's own products should be treated cautiously. Bank staff are often undertrained, underpaid and overworked. (You could ask for the employee's qualifications before getting advice.) So do your own research and/or find an independent financial adviser.

Nothing is set in stone. Your bank won't tell you this, but sometimes it will waive a fee, for example an overdraft or an ATM fee, depending on the circumstances. You have nothing to lose by asking, if you can argue persuasively why they should waive the fee. Citizens Advice says your bank should treat you sympathetically if you can show financial hardship.

As stated in the previous slide, some things are negotiable – such as interest rates or waiving fees – if you can make a good case for it. In that instance, talking to an employee in person is better than filling in a form online.

If your account is overdrawn and you get paid, your bank could use this money to pay off your overdraft without your permission. However, you have a right to ask them not to do this so you can pay your rent or mortgage first. This is called first right of appropriation. You have to ask your bank in writing, and you'll need to write to them with new instructions every time money gets paid into your account. Make sure you write 'first right of appropriation' in your letter.

If money is mistakenly credited to your account, your bank or building society can recover the money, assuming they do this within a reasonable time. But you may be allowed to keep the money, for example if you didn't realise the bank had made a mistake and spent the money in good faith. You would have to prove that you spent it in such a way that it would be unfair to ask you to pay it back. You can complain to the Financial Ombudsman if you think your lender is being unfair in asking you to repay the money.

If you do have to pay it back, you could try to reach an agreement with your bank to pay it back in instalments without interest being added.

The Financial Ombudsman Service has more advice on what happens when payments have been credited to the wrong account. If you did something wrong - for example, by entering the wrong account number - rather than the bank, the Financial Ombudsman may still uphold your complaint. They consider whether the financial institution made it clear to the consumer that only the bank sort code and account number are used to process the payment, rather than the name of the payee. They will also ask whether the lender should have realised that the consumer had made mistake, and once the problem came to light, did the firm take reasonable steps to try to get the money back from the recipient.

If too much is deducted from your account, your lender may have to refund the full amount of the payment. For example, if the money is taken through a direct debit or credit card payment for a hotel room or car rental. When deciding whether the debit was reasonable, the bank or building society will take into account your previous spending pattern. But the bank doesn't have to refund the payment if you agreed the amount beforehand or were informed of the payment by your lender at least four weeks before.

If you don't have enough money in your account to cover a direct debit payment, your bank may not make the payment. It doesn't have to tell you that the payment hasn't been made, so the onus is on you to keep checking your account. If, on the other hand, the payment goes through, you may be charged for an unauthorised overdraft.


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