Bank of England Base Rate – Statement


The Bank of England has raised UK interest rates by 0.5 percentage points to 2.25% in an attempt to combat soaring inflation amid the cost of living crisis.

What does this mean for my mortgage?

Those on variable rates or tracker rates will be immediately affected, your lender will be writing to you to confirm your new monthly payment.

If you are on a fixed rate, your rate will remain the same until the end of your current product.

My mortgage is coming to an end soon, should I choose a 2 year fixed, 5 year fixed or Tracker?

Although there are many financial reports that are offering predictions over mortgage interest rates, they are just that, and we cannot say what the rates will do in the next 5 years. What we can say for sure is a fixed rate mortgage will guarantee your payments allowing you to budget over a longer period and will give you security of knowing your payments won’t increase. Some clients might prefer a ‘tracker’ product as they aren’t comfortable with locking in at a higher rate however we can’t predict or advise whether this will be a more cost effective over the long term.

Should I break my current fixed product to re-fix?

Doing this will likely incur a hefty Early Repayment charge of up to 5% of the mortgage balance but it will mean you can select a new long term fixed product at the rates available now. Again, we can’t advise whether this will outweigh the early repayment charge and it will be driven by each individual client’s needs.

Some lenders are allowing us to look at switching your mortgage product 6 months in advance so we are recommending for all our clients to book in a review 6-7 months before the end of their current fixed product.

Regardless, we can expect monthly mortgage payments to be higher than they have been in previous years, and we don’t anticipate the rates coming down to the levels we have seen any time in the near future.

Does the base rate increase affect affordability?

Generally, no, as lenders tend to stress at a much higher interest rate however the cost of living increases have already and will further reduce maximum lend, due to the reduction in expendable income.

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