The base rate has just gone up to 0.75 per cent. So, what does this mean for you and your mortgage and what should you do next?
The Bank of England’s Monetary Policy Committee has today (17 March) voted to increase the base rate from 0.5 per cent to 0.75 per cent. This marks the third consecutive increase. The rate increased from 0.1 per cent to 0.25 per cent in December and went up to 0.5 per cent in February. The Bank of England is increasing the base rate in an effort to control rising inflation which is currently at a 30-year high of 5.5 per cent.
Latest increase
This latest increase means that the cost of borrowing is back where it was two years ago, but there is also talk of a further increase later in the year. The Bank of England is warning that inflation could reach 7.25 per cent in April. Inflation going up is partly due to rising international energy prices.
What does today’s base rate increase mean for your mortgage? It depends on the type of mortgage you have. If you’re on a standard variable rate mortgage, your lender may choose to pass on the increase to you and your monthly payments would then go up. If you are on a tracker rate mortgage, the interest you pay is in line with the base rate and you will definitely pay more each month.
If you are on a fixed-rate mortgage, your monthly payments will stay the same. However, when your fixed-term comes to an end, you will be placed on your lender’s standard variable rate which is likely to be higher.
Speak to an expert
If your fixed-rate mortgage expires this year, we strongly advise you to speak to an experienced mortgage broker and find out about your options now. Missing paperwork could slow your application down, so make sure you pull together all of the paperwork your broker will need to support your mortgage application.
The sooner you seek advice on your mortgage, the more likely you are to get the most competitive rate. Act now to try and lock in a fixed-rate mortgage or we can look into remortgaging on your behalf.
‘Lenders have been repricing products at a higher frequency than normal over the last few months, and in some cases, we have seen lenders withdraw their product range with as little as an hour’s notice,’ says MB Associates’ Sales Manager, Phil Leivesley. ‘It’s imperative that we have all of the documents that the lender will need to support an application but unfortunately, this is no guarantee that we’ll be able to secure a product. Our team will endeavour to secure the rate that has been recommended but we can only do this if we are given an appropriate level of notice by our lender partners.’
Finally, if you have savings, you will no doubt be hoping that the base rate increase will mean you will benefit from higher interest on your money. However, according to the website, This Is Money, only one in ten banks and building societies passed on the previous base rate rise in February to savers.