The Bank of England has increased interest rates from 0.1 per cent to 0.25 per cent. Here’s what it means and how it may affect you.
The Bank of England’s Monetary Policy Committee has increased interest rates to 0.25 per cent in a surprise decision. The Monetary Policy Committee voted to lift the base rate by 15 basis points in a bid to combat inflation, which is at a ten-year high.
Despite high levels of inflation, expectations of a rise had been reduced by the sudden spread of the omicron variant and its anticipated threat to our economic recovery, but the increase still went ahead.
So, what does this mean for homeowners and those looking to get onto the property ladder?
Fix your rate
Our founder, Monica Bradley, strongly recommends that anyone not on a fixed-rate deal with their mortgage secures one at their earliest opportunity. ‘There’s no need for people to panic but just talk to your mortgage adviser as soon as you can and let’s get your rate fixed for peace of mind,’ she says.
To put things into perspective, Monica also points that interest rates still remain low. ‘This increase is by a quarter per cent which really had to happen off the back of inflation reaching 5.1 per cent,’ she adds.
Anyone struggling to pay their mortgage during these challenging times can look at the term of their loan to try and ease the pressure a bit. Again, talk to your broker for expert advice.
Borrowing for first-time buyers
If you’re a first-time buyer, rates will be going up and lenders will be busy but there are still competitive interest rates available on mortgages.
Fortunately for many, around 74 per cent of mortgages are fixed-rate according to UK Finance, with the majority of borrowers opting to fix their rate for either two or five years. Around 26 per cent of mortgages are on variable rates, which are either standard variable or tracker rates. If you are currently on a fixed-rate mortgage then your monthly payments will, of course, stay the same, but if you are on a variable rate your payments will go up.
UK Finance estimates that the rise in the base rate will lead to an average increase in repayments of £9.58 per month for those on a standard variable rate. The financial body is keen to emphasize that interest rates have been extremely low to date.
‘Today’s interest rate increase marks a rise from historically low levels,’ says Charles Roe, Director of Mortgages at UK Finance. ‘Over 74 per cent of mortgage customers are on a fixed rate product and will see no immediate change to their mortgage payments. For those who have come to the end of their deal, a wide range of mortgage products are available, and we encourage homeowners to shop around. Any customers with concerns about managing their mortgage should contact their lender who will be able to explore the range of individual support options available.’
We’re here to help if you have any questions or concerns about your mortgage. Please contact us for more information.