Leon Neal / Staff

The UK economy will improve in 2018 after a very weak start to the year, according to Bank of England governor Mark Carney. If the economy improves as he expects, the Bank of England base rate will likely rise from 0.5% to 0.75%.

Carney maintains that Britain’s weak first quarter was down to “temporary and idiosyncratic factors” – in other words, the downturn was caused by the Beast from the East’s heavy snowstorms.

Back in February, the Bank of England indicated that the base interest rate was likely to go up sooner than expected, because the UK economy looked quite strong. At one point, the financial markets were almost certain that the base rate would go up in May.

But then, at the end of April, data showed that our GDP grew just 0.1% in the first quarter of 2018 – the lowest level of growth in five years. As a result, the Bank of England voted against increasing the base rate.

Over the past few years Carney has strongly suggested multiple times that the base rate was about to go up – only to be stumped by a tumultuous British economy. Carney, for his part, says that his overall assertion – that the base rate will slowly increase – is still accurate.

Most financial experts expect the base interest rate to rise by 0.25% to 0.5% per year for the next three years, assuming the economy strengthens and consumers keep spending. Brexit uncertainty continues to be a factor, too – whether it fades over time, or intensifies as the scheduled leaving date (March 29) draws closer.

If the base rate increases, the interest rate on mortgages and savings accounts will usually increase by around the same amount. If you’re nearing the end of a fixed or promotional period on your mortgage, you should consider remortgaging now – or read our guide on preparing for a higher interest rate on your mortgage.

Now read about how GDPR will affect you and your finances