NEWSFLASH-The Bank of England just increased Base Rate to 0.25%
The Bank of England raised its main interest rate to 0.25 per cent today as inflation pressures mount. It has become the first major central bank in the world to raise borrowing costs since the coronavirus pandemic hit last year.
Most expected BoE to keep interest rates at 0.1 per cent due to a new surge in coronavirus cases however the Monetary Policy Committee voted by 8-1 to raise interest rates to 0.25 per cent, up from 0.1 per cent
An increase of 0.15% is not much but is this a warning of a further increase to come and a way of urging people to curb their spending? (UPDATE March 18th 2022: The Bank of England just increased Base Rate to 0.75%)
With Inflation currently over 5% The BOE decision to raise this rate ahead of Christmas and in the face of another potential economic blow with the Covid pandemic, indicates how seriously they are taking the recent rise in inflation.
What does this mean for you?
Even with the action taken today in the form of the rate rise to try and curb inflation, households should expect their costs to continue to rise for the near future, The small rise in the base rate will have a limited impact on demand and may take time to filter through to consumer behaviour.
The signal today’s rate rise sends is that we should expect a period of belt-tightening and less cheap credit from here on out.
Will my mortgage go up?
If you have a variable rate mortgage – typically a tracker that follows the base rate, or a loan on a lender’s standard variable rate, this will likely increase. A tracker mortgage will directly follow the base rate and your payments are likely to increase and the extra cost will fully reflect the base rate rise.
On a standard variable rate, it is less straightforward – these can change at the lender’s discretion however Banks and building societies are able to pass on the full increase, so you should expect a rise.
Rachel Springall, the finance expert at Moneyfacts, said: “Borrowers sitting on their standard variable rate (SVR) may see their rate rise within a month.
“A rise of 0.15% on the current average SVR of 4.4% would add around £408 on to monthly repayments over two years.”
Most borrowers are, however, on fixed-rate mortgages. Interest Rates have been so low in recent years that our advice to most clients have been to lock in the low fixed rate for a specified period, and according to The Guardian Money news, since 2019, 96% of new mortgages have been taken on fixed-rate and these are not affected.
The Mortgage Girl is urging Homeowners to check their mortgage rate and consider switching to a cheap deal while they’re still available.
If you are on your lender’s standard variable rate, now is an important time to consider a new mortgage deal. Why pay more for your mortgage than you have to? Please contact The Mortgage Girl and we can review your mortgage to find you a better deal.
If you are on a tracker rate deal and are concerned about further rises in the future, let’s review your remortgage options to see if you would feel more comfortable fixing your mortgage during this uncertain period.
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