The Bank of England has just announced it is increasing the base rate to one per cent and is predicting that inflation will peak this year at more than ten per cent.
Interest rates have just gone up. The Bank of England’s Monetary Policy Committee has voted to increase the base rate to one per cent, an increase of 0.25 per cent.
This is the fourth consecutive increase and the highest interest rate for 13 years.
So what does the increase mean for your mortgage?
If you’re on a fixed-rate deal, your monthly payments won’t be affected. You’ll pay the same until the end of your fixed-rate term. If you’re on a standard variable rate, your lender may choose to pass on the increase to you which means you will pay more. If you’re on a tracker rate mortgage, the interest is calculated in line with the base rate, which means you’ll definitely pay more.
Why the increase? The Bank of England is trying to curb inflation, which is currently at a 30-year high. People are understandably spending more now that the worst of the pandemic seems to be over. Raising interest rates is one way of encouraging people to spend less.
If you’re on a fixed rate deal and are concerned about what you will pay when it comes to the end of its term, it’s important to seek advice. If you do nothing at the end of your fixed-rate term your lender will place you on its standard variable rate, which is likely to be higher than your current rate.
You don’t have to stay with your current lender. We’re here to help you get the best deal on your mortgage, so contact us and we’ll be glad to explore your options. If your fixed-rate deal is due to end in the next six months, don’t delay. The sooner you contact us the better, as it will give us more time to shop around for you.
If you’re on a standard variable rate mortgage and your monthly payments will go up, talk to us about remortgaging. Depending on your circumstances, we may be able to get you a better deal. Remortgaging can be an effective way to save money on your mortgage, even if you’re not near the end of your term and you’d have an early repayment penalty to pay. In some situations, it may still be worth doing.
For advice on remortgaging, please contact us and we’ll be glad to offer you a free mortgage health check to ensure you are getting the most competitive rate for you.