UK Interest Rates: How Have They Changed Over the Years?

• 18th-century interest rates rose from 4 to 5% in 1719. However, they remained relatively stable throughout numerous financial crises like the South Sea Bubble burst of 1720.
• 1822 saw the Bank of England lower the rate to 4%.
• The 19th century saw more interest volatility, where figures would fluctuate between 4 and 10%.
• The panic of 1857 started when the New York base of an Ohio investment company ceased payments after a cashier embezzled funds from the company. This caused ripples across the international market.
• Britain received a significant number of American exports and held a large amount of American debt. Foreign debt had increased by $263 million in the previous three years. Once the Ohio investment company failed, so did numerous establishments in Liverpool, Glasgow and London. Subsequently, interest rates rose to around 10%.
• The 1866 panic – a financial downturn caused by the failing finance firm Overend, Gurney & Company – saw the Bank of England raise interest rates to 10% again.
• However, the financial boom of earlier years ensured that other banks could rise to prominence and help stabilise the economy.
• The 1873 panic saw the country’s economic leadership weaken again. In 1869, the Suez Canal opening meant British overseas trade – which could not sail through the canal – suffered as a result. The ‘73 panic lasted until 1879. However, interest rates rose to 7% at the start of the panic and continued to fluctuate between 2% and 7% until 1930, bottoming out at approximately 2%.

• Margaret Thatcher’s government raised interest rates to 17%. This was to combat a steadily rising inflation rate. Interest has never been higher in the UK.
• In the last five years of the 1980s, UK house prices increased by a staggering 109%. This is the most substantial five-year increase in UK history.
• This measure reduced inflation but also had a negative knock-on effect on manufacturing exports.
• The rate dropped to 9% in 1982.
• Interest rates rose again in the late 1980s as the country tackled house price rises. The rate rose to 14.88% in 1989.

• During 2003-2007, interest rates rose from 3.5% to 5.75% to temper an over-inflating UK economy.
• The 2008 global financial crisis kept interest rates low. The base rate fell to its lowest level in three centuries. The rate fell to 0.5% in 2009. They fell again to 0.25% in 2016, which was great for the property market. However, they began to rise slightly in 2017 before hitting 0.75% in the summer of 2018.

As you can see, interest rates have fluctuated immensely throughout UK history.

It is worth mentioning that property investment price growth has slowed dramatically since the highs of November 2022 – so to have interest rates.

We cannot predict what will happen with interest rates in the future. However, experts suggest that interest rates have now peaked and may stay the same until 2024. With inflation coming down slowly, we may see interest rates fall sooner rather than later. Questions such as is property a good investment ? are often heard within the investor market place when interest rates fluctuate.

When Will the MPC Meet to Discuss the Current UK Interest Rate Again?

The MPC is set to meet two more times in 2023 – on the 2nd of November and the 14th of December.