Mortgage Base Rate Increase
In February, the bank of England announced that it would raise its base interest rate from 0.25% to 0.5%. This is the first time since 2004 that there have been back to back interest rate rises with the previous rise from 0.1% to 0.25% happening only on the 16th December 2021. Here we will explain how this rate increase might affect your current mortgage and what it may mean for getting a mortgage in the future.
Depending on what type of mortgage you have you might not be immediately affected by the Bank of England base rate increase. This is because according to UK finance the most common type of mortgage in the UK is a fixed rate mortgage. If you are part of the 74% of mortgage holders that have this contract, then the monthly rate for your mortgage will not go up until the end of your fixed term. However, if your fixed term is coming to an end it would be advisable to get a new deal as soon a possible.
If you are on a “discount” or standard variable rate (SVR) mortgage then it is likely that your monthly payments will increase. This is because the SVR is set by the lender. You are likely to be on an SVR after your fixed term or tracker period on your mortgage has come to an end. Money Saving Expert calculated that this would lead to a £12 increase per month for every £100,000 on your mortgage.
If you are on a tracker mortgage then your monthly repayments will automatically be increased. This is because tracker mortgages track the Bank of England base interest rate. Again this would mean that the monthly payments would increase by around £12 per month per £100,000 on the mortgage.
For those looking at getting a new mortgage or remortgaging this means that the cost of them will be going up. And based on current inflationary trends the Bank of England might look to increase their base rates again in March. To help with this we have teamed up with Penguin Wealth. Together we hope to give you expert mortgage advice and help you get the best deal possible.
If you are looking to get more information on how these mortgage changes affect you buying or selling a property, please get in touch with us here.