What Does The Bank Of England Base Rate Increase to 3% Mean For You?
The Bank of England has raised interest rates by 0.75% - it’s biggest hike in 33 years – and with mortgage rates continuing to soar, it’s more important than ever to check you're on the best mortgage deal.
The Bank of England has raised the base rate by 0.75%, its biggest hike in 33 years, as it tries to curb surging inflation. The increase takes the base rate to 3%. The decision has pushed the base rate of interest to its highest level since 2008.
According to reports, around 2 million households on tracker mortgages or other variable mortgages are expected to see mortgage payments rise by an average of £880 per year as a result.
The 0.75% increase announced today by the Bank of England’s Monetary Policy Committee was widely expected and ahead of the announcement mortgage rates had already jumped again this month.
Mortgage rates had already been rising over the last year as the Bank of England continued to increase interest rates. Although the sharpest rises in mortgage rates were seen in the wake of the ‘Mini Budget’ in September.
It’s a tricky backdrop for first time buyers as lenders have already started pulling 95% LTV mortgages, with just 32 loans available to customers with a 5% deposit, according to analyst Moneyfacts, down from 35 a week ago. So if you’re buying a house it’s vital to get mortgage advice.
And if you’re staying put, it’s more important than ever to check your mortgage deal and find out if you could save money in the short and the long term by remortgaging.
How do increases to the base rate affect my mortgage?
The amount the rise in the base rate of interest will cost you will depend on what type of mortgage you have.
If you’re on a tracker mortgage, an increase to the base rate means your monthly mortgage payments will increase as well.
While if you’re on a Standard Variable Rate your payments may increase as well. But your lender decides how much, if any, of the increase they would pass on. And if it wanted to your lender could increase rates by more.
If you’re on a fixed rate mortgage you will only see a change in your repayments when your fixed term ends. However the best rates available on fixed deals have been rising rapidly. And the rate you may be able to get when your deal ends may well be much more expensive than what you’re currently paying. So if you’re one of the 30% of homeowners whose fixed-rate deal is coming to an end soon, you ought to plan ahead. It can take six months to remortgage.
The rates available this month are undoubtedly high compared to what we’ve seen in recent years. But don’t assume that’s a reason not to take action. No one knows what will happen next – mortgage rates could stabilise or they could shoot up higher. So if you’re looking for a first mortgage or are planning to remortgage in the next few months you should start looking at your options asap. The best way to protect yourself from a mortgage rate rise is by asking someone at Mortgage Tree to check if your on the best rate.