It was July 2007 when interest rates last rose – going from 5.5% to 5.75%.
It happened less than 10 days after Tony Blair left office, while Steve McClaren was England manager, Fernando Torres was still waiting to make his Liverpool debut and Rihanna’s Umbrella was Number One.
But in the decade since then they’ve only headed one way – down. And that’s not normal.
In the ten years between the Bank of England becoming independent and the last increase, rates used to move up and down every few months – between a high of 7.5% (June 1998) and a low of 3.5% (July 2003).
But then the credit crunch hit.
In six months rates went from 5% – more or less the average of the previous decade – to a tenth of that, as the Bank of England desperately slashed interest rates to try and save Britain from the worst of the recession.
It wasn’t meant to last long, with the 300-year low in interest rates expected to be followed by a rise shortly after.
But things just didn’t improve for the British economy and the next move was, incredibly, downwards.
Last year the base rate fell from 0.5% to 0.25% as the interest-rate-setting Monetary Policy Committee tried to stabilise things following the shock vote to leave the EU.
But the tide might finally be changing – with three members of the Monetary Policy Committee voting to raise rates in June.
So are rates finally set to rise again, and what will the fallout be if they do? We take a look.
Why rates are changed
The Bank of England sets the Base Rate in the United Kingdom. It’s been doing this independently from the Government since May 1997 – so more than 20 years.
But it is still guided by the government – who sets it targets to achieve, if not telling it how to achieve them.
The targets are to keep inflation – as measured by the consumer prices index – as close to 2% as possible and to keep the economy growing at a sustainable rate.
Traditionally that meant if inflation was rising, so would rates. While if prices were falling, interest rates would too.
The idea was that when interest rates were high it encouraged saving and discouraged borrowing – meaning people would spend less money and prices would fall again.
The reverse was also true, make savings less rewarding and borrowing cheaper and people would be inclined to spend more of their cash now – boosting the economy and seeing prices climb as a result.
Sadly, that lever to control inflation hasn’t worked for some time.
When people are borrowing just to survive and prices are soaring but wages aren’t, any rate rise could result in potentially millions of people and businesses going bankrupt, job losses and repossessions.
In short, it could turn tough times into apocalyptic ones.
The Bank sensibly decided discretion was the better part of valour and kept rates on hold – waiting for things to improve.
The waiting has gone on a long time, but experts think that it might soon be over.
Are interest rates about to rise then?
In June three people on the eight-strong committee voted to increase rates.
It’s not surprising, inflation has been above the Bank of England’s target rate since February and only looks set to rise further. Raising rates is the traditional way to bring this down.
The question is whether inflation will naturally fall – which makes the decision to raise rates now unnecessary at best and dangerous at worst – or needs to be addressed.
“The sharp rise in inflation has coincided with a slowdown in economic growth along with wage growth,” said Azad Zangana, Senior European Economist and Strategist at Schroders.
“The Bank of England has to decide whether the inflation the UK is experiencing at present is temporary or permanent.”
Currently, traders are pencilling in a rise in rates for January 2018, although only to 0.5%.
But, as ever, things will depend on what happens to the UK economy, the global economy and especially what happens with the Brexit negotiations.
Should interest rates rise?
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What you can do now to prepare for a rate rise
A staggering 8 millions Brits haven’t seen interest rates rise in their adult lives, Hargreaves Lansdown calculates, while millions more will have barely been affected by the last one.
That means while pensioners clamour for better rates of interest on their savings, millions of working families might be in for a rude awakening.
The good news is that there are things you can do now to prepare.
Firstly, if you have a tracker or variable rate mortgage, consider switching to a fixed-rate deal now . There are deals where you can lock your rate in for 10 years and still get a cheap rate now, and really cheap deals for fixes of 2, 3 and 5 years.
Second, pay off as much as the mortgage as possible – overpayments don’t just reduce your mortgage rate now, they mean you’ll pay less every month until it’s cleared.
If rates rise, that means rate rises will have a smaller impact on you.
If you’re worried about job losses, there are insurance products you can take out that will pay your essential bills for a few months while you look for work .
You can read our full guide to protecting yourself from job losses here .
As for savers – get ready for (a bit) more interest.
Rates won’t rocket overnight, but it will be worth your while to keep an eye on the best buy tables and be ready to move your money to somewhere more worthwhile.
In the meantime – there are steps you can take now to earn a better return too.