This afternoon, the Bank of England’s Monetary Policy Committee (MPC) released their quarterly report that saw a much-anticipated interest rate rise officially announced. Following this year’s back-to-back hike, an increase from 0.75% to 1% sees us entering territory not charted since the aftermath of the 2009 financial crisis.

As the UK grapples with soaring inflation driven by rising energy costs, this is the fourth time in a row that the Committee has voted in favour of an interest rate hike. The report also suggested, with the war un Ukraine compounding the cost of living crisis, that inflation might continue to rise to as high as 10% in the coming months.

So – is there any optimism to be found? And is now the time to stick or twist?

2022 is shaping up to be a battle of nerves that will put many people’s financial judgement to the test. Do you lock down the cost of borrowing and utilities now, at prices which would have seemed expensive until recently, or bide your time in the hope that events will turn and run the risk of falling foul of future rate hikes?

Economic optimism is far harder to come by than most people hoped for, even with the pandemic subsiding. Many households and business owners are in new and unchartered territory when it comes to managing their finances. But it’s important to look past the gloom and remember that borrowing costs remain low by any sensible definition of ‘historic standards’.

The flipside of today’s rise is that investors will be seeking higher returns than they’ve been willing to settle for while interest rates flirted with zero. The landscape for investment and borrowing decisions is changing rapidly and financial planning can’t afford to be seen as a once-a-year exercise in the current climate.

Disclaimer: The opinions in this article are solely those of the author and should not be seen as investment advice. Everyone’s circumstances, objectives and existing portfolios are different, and as such, should be analysed individually. If you would like to review your current investments, please do get in touch for a free initial consultation with one of our experienced wealth managers.