Do you remember the days when the Bank of England interest rate was double digits?

20 September 2018

Can you remember when the Bank of England interest rate was in double figures?

If so, you probably also remember rag-rolling, shoulder pads as weapons of mass destruction and Bob Geldof telling us all to “Give us your f***ing money”.

Yes, that was the 80s. The days when you could buy a single garage in Knightsbridge and still have change out of half a million. You tell that to the kids of today and they won’t believe you.

Yes kids, back in the day, when people used to look at things rather than obsessively photograph them (weird but true), it was actually expensive to borrow money.

Phil Kennedy at BBC Radio Berkshire was one of many who remembered having a mortgage in the 80s at 16% when we spoke on the day of ‘the great interest rate rise to 0.75%’ back in August.

Back in those days, changing the base rate was something that we the people, not just the media, followed with bated breath.

In the heady days of the 1980s when, under another Conservative government, rates were hiked up to around 15% for a year, a change in interest rates was a monthly, sometimes fortnightly, event as the Chancellor of the Exchequer, then in charge of manipulating them, approached monetary policy like Donald Trump approaches Twitter at three o’clock in the morning.

It wasn’t until the 90s that interest rates got a bit of a breather and finally a ‘get out of jail’ card in 1997 when Gordon Brown made one of the few sensible decisions of his tenure as Chancellor and handed over the decision-making to the Bank of England.

Things stayed calmer then, out of the clutches of party politics, until its vertiginous drop in 2009 to 0.5%, where, as we know, it stayed for way longer than any of us had suspected.

So, you could forgive the media for getting over-excited at a 0.25% (count those percentage points) rise in August this year. This was a move – an actual move – which had been promised and not delivered so many times. For months, years even, we had been left hanging on, waiting for a rise like someone expecting a parcel from Yodel only to find it three days later in next door’s bins.

And we did see some action. On the day of the rate rise itself my mortgage lender gleefully texted me to say there would be an ‘alteration’ in my payments from next month. “Don’t worry. We’ll be writing to tell you all about it,” it added. It did too.

I spoke on various media outlets on the day, including the BBC News Channel and a host of BBC radio stations, answering questions from listeners such as: “Why is my bank charging me 4.5% for my mortgage if interest rates have been so low?” to which the answer is, of course, “Because it hates you”.

Savers were even more resentful: “If this is the second time interest rates have gone up in the last couple of years, how come my Isa interest rate has gone down?” asked ‘Anon’ of Cheadle, Staffordshire.

I could answer the same as above, but it’s almost more depressing than that: banks just don’t care any more. They’re like an ex-boyfriend who is so keen for you to find someone else that he’s on the lookout for you himself. That’s how little he’s into you. For a start, banks have access to cash elsewhere. They don’t need us to lend it to them quite so much, so they’re not fussed about enticing us in.

Geoff, who called in to BBC West Midlands on the rate rise day, asked why all UK savers didn’t just vote with their feet and take all their money out of the banks at the same time in protest. Well we could, but we won’t, and that’s another reason why banks don’t bother. We’re still more likely to get divorced than to switch our bank accounts, so we’re even less likely to bother with our savings accounts.

And not only that, but it’s clear that there are much bigger forces potentially at work than mere interest rate movements that are likely to affect prices and spending in the near future. I was hoping to get to the end of this page without mentioning the ‘B’ word, but it’s the elephant in the room that no one’s feeding buns to, so I have to. Let’s see next year just how effective interest rate jiggles will be if and when we crash out of the EU with no deal in place and no plan for imports and exports. Dropping borrowing rates by even a whole percentage point is likely to be as impressive as slinging rocks at an armoured tank. I hope I’m wrong but… let’s see.