The Bank of England has just announced a base rate increase from 3% to 3.5%. The rate increased from 2.25% to 3% last month and has consistently risen in the last year.
The base rate has increased again – this time from 3% to 3.5%. The base rate is the interest rate that banks pay when they borrow from the Bank of England. The base rate has increased eight times this year. Last December, the rate stood at 0.1% – a historic low.
What does this latest base rate increase mean for your mortgage? It depends on the type of mortgage you have.
If you’re on a fixed-rate mortgage deal, your monthly payments will stay the same until the fixed term comes to an end. Once you get to the end of your fixed rate term, your lender will place you on its standard variable rate, which is likely to be higher. It’s advisable to look into remortgaging at least six months before your fixed-rate deal comes to an end. While you may not get a rate as low as the one you’re currently on, you’re likely to get a better deal than the standard variable rate you’ll be put on if you get your broker to shop around for you.
If you’re on a standard variable rate mortgage, your monthly payments will go up if your lender chooses to pass on the increase to you.
If you’re on a tracker rate mortgage, your monthly payments will definitely go up as the rate moves in line with the base rate.
Seek mortgage advice
If you’re worried about your mortgage, don’t suffer in silence. Get in touch with us, and we’ll be glad to advise you.
If you are struggling to make repayments, there may be other options open to you, depending on your personal situation. You may be able to extend the term of your mortgage so that your monthly payments are lower.
However, it’s important to note that if you do extend the term of your mortgage, you will pay more interest in the long term. In the short term, though, it may take the pressure off temporarily.
On a brighter note, it seems likely that, despite this latest base rate increase, the cost of fixed-rate mortgages looks set to continue to fall in the new year from the highs we saw in the immediate aftermath of the mini-budget.
We’re here to help with mortgage advice. Contact us today.