- Fixed-rate mortgage deals aren’t entirely shielding homeowners from higher rates
- Many are bracing for impact by cutting back in advance of higher repayments
Setting interest rates is a surprisingly abstract process. Rate-setters vote to change the base rate and initially, this applies to only a few financial institutions. Savings accounts and mortgage rates are affected, but changes do not affect everyone immediately.
Over the next 18-24 months, the new policy rate is passed on to the rest of the economy through a series of 'monetary policy transmission mechanisms’. Soon, total activity levels start to change, feeding through to total demand. This starts to impact domestic inflationary pressure, and, eventually, the inflation rate. That makes for what is at points a rather vague and theoretical process.