What the Bank of England base rate increase means for mortgages
Updated: Jul 14
What the Bank of England base rate increase means for mortgages: A quick overview of the impact of the Bank of England interest base rate increase on mortgages and borrowing in general.
The Bank of England recently announced its decision to raise the base rate to 5%, a continuation of increasing rates which began back in early 2022. The move is designed to try and tackle high inflation by encouraging people to borrow less and save more. This also aims to reduce the demand for goods and services to help to slow inflation. While the move was widely anticipated, it has still surprised many borrowers who have grown accustomed to historically low rates over the past several years.
So what does this interest rate hike mean for you as a borrower?
Here are a few key takeaways:
1. Mortgage rates are likely to rise.
Lenders' mortgage rate trends are generally linked to the Bank of England's base rate, so it's likely that we'll see an increase in lenders' new business product rates in the coming weeks and months, this includes product transfer rates that lenders offer existing borrowers. If you're considering buying a home or refinancing an existing mortgage, it may be wise to act sooner rather than later to lock in a lower rate before they begin to rise.
Lenders' standard variable rates or managed rates will also likely increase which will affect anyone that is outside of an initial period, i.e. outside of their fixed rate.
2. Borrowing will become more expensive.
With higher interest rates, borrowing money, in general, is likely to become more expensive. This could impact everything from credit card rates to car loans, making it more important than ever to carefully consider your borrowing decisions and keep your debt levels in check.
3. Savers may benefit.
While borrowers may be feeling the pinch of higher rates, savers could see some benefits. Banks and building societies are likely to increase their interest rates on savings accounts and other deposit products, meaning that savers could earn more on their deposits than they have in recent years.
4. Contact your mortgage provider if you are struggling.
If you’re struggling to pay your mortgage, you should contact your lender as soon as possible. They may be able to help with things like payment holidays, deferred payments or switching to interest only.
Your home may be repossessed if you do not keep up repayments on your mortgage.
At MRG Private Clients, we're committed to helping you navigate the complex world of finance and make informed decisions about your mortgage. If you have questions or concerns about what the Bank of England base rate increase means for mortgages and how it may impact your financial goals, please get in touch.