The Bank of England has raised the base rate to 4% from 3.75% today, the first increase in more than three years.
A rise the markets expected
Few people were surprised by the announcement. Ahead of this morning’s meeting, forecasts put the probability of a rise to 4% as high as 94%, according to BlueGamma’s Bank of England interest rate forecast. Speculation had grown following last week’s budget changes, with many economic experts expecting rates to climb further.
The move is an increase of 0.25 percentage points, which may sound small but will still be felt by many households and businesses.
Why rates have risen
The reasoning behind the decision has been commented on by Chancellor John Healey, who stated:
‘The ongoing Iran war is reaching into the pockets of UK families and businesses.’
Higher energy costs have pushed up the cost of living, and raising the base rate is one of the Bank’s main tools for bringing inflation back under control.
What it means for homeowners
How much you notice the change depends on the type of mortgage you have:
- Tracker and variable rate mortgages: payments are likely to rise soon, as these follow the base rate closely.
- Fixed rate mortgages: your payments will stay the same until your deal ends, but it’s worth planning ahead for what happens next.
- Buyers and remortgagers: lenders may adjust the rates they offer, so the deals available today could look different in the coming weeks.
If your current deal is due to end in the next few months, it could be worth looking at your options sooner rather than later.
Nicola Henton, Our Mortgage Protection officer, has said this about the hike in interest rates:
“Although this is the outcome that no one wanted, it was very much an expected outcome of today’s meeting. Lenders have been preparing for this for some time, so we don't expect a sudden shock for borrowers. That said, we understand that any rise can be unsettling, particularly for homeowners on a variable or tracker rate, and for those whose fixed deal is due to end in the coming months. The most important thing is not to panic or put off a conversation.
“As a whole-of-market brokerage, we can review your options early, compare what is available and, where it makes sense, help you secure a rate before your current deal ends. Every customer’s situation is different, so if you have any concerns, our advisers are here to talk them through with you.”
Getting advice that suits you
A rate rise can feel unsettling, but you don’t have to work through it alone. As a whole-of-market brokerage, Hello Mortgage can compare deals from across the market and help you decide whether to fix, switch or stay put.
If you’d like to talk through what today’s decision means for you, get in touch with our team.
Contact us today.
Tel: 0800 292 2557
Email: Hello@hellomortgage.co.uk
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