With interest rates rising again in March to 0.75 per cent, this will have a knock-on effect for mortgage rates. Following the economic strain of the pandemic, inflation rates are at their highest level for 30 years at 5.5 per cent. The Bank of England has increased the base to combat inflation, but what does it mean for homeowners with mortgages?
Here, we explore what rising interest rates mean for mortgages.
What is the Bank of England base rate?
The base rate is the Bank of England’s interest rate that it charges commercial banks for loans. To combat rising inflation, the Bank of England increased interest rates in March from 0.5 per cent to 0.75 per cent.
How much have interest rates increased in the past 6 months?
Interest rates have already increased three times in the past six months – in December 2021, they were raised from 0.1 to 0.25 per cent, then raised again to 0.5 per cent in February 2022.
The Bank of England is due to make its next announcement on 5 May, so it’s possible that the base rate could rise even further.
Will my mortgage rates rise?
If you have a tracker mortgage, you will see an immediate change to your monthly payments. For the average tracker mortgage customer, monthly repayments will increase by £25.76. For those with standard variable rate (SRV) mortgages, it’s likely that lenders will adjust your rate in due course. Monthly repayments are predicted by UK Finance to increase by £15.96 on average.
Around 74 per cent of homeowners in the UK have a fixed-rate mortgage. If you have a fixed-rate mortgage, your repayments won’t change until the end of your fixed rate period. After this, they’ll revert to your lender’s SVR.
If you need further advice on what rising interest rates will mean for your mortgage – and if you could get a better deal elsewhere – you should speak to a mortgage adviser. At Graham & Co in Andover, our in-house mortgage advisor will be happy to help – contact the team today.