Interest rates have recently raised to their highest level in 13 years with the Bank Rate now standing at 1.75%. The Bank of England has also indicated it may increase again towards the end of 2022.

So why has this happened and what does this mean?

The Bank of England’s Monetary Policy Committee sets the Bank Rate to influence and meet inflation targets in the UK.
The Bank Rate is what the Bank of England charges other lenders when they borrow money, which affects the interest rates that the lenders then charge on borrowing and what is earned on savings.

You can find out more about the Bank Rate on the Bank of England website by clicking here.

How will interest rates affect my mortgage?

Depending on the type of mortgage you have, how long you’ve had your mortgage and how much your mortgage is for, a change in the bank rate could affect your mortgage payments.

If you’re on a fixed rate mortgage deal, then it’s business as usual right now – your monthly payments aren’t affected by the base rate change and your monthly payments stay the same. When your fixed rate ends your mortgage will likely be moved to a variable rate as detailed in your mortgage documents. If your mortgage deal is coming to an end shortly, reach out to your lender to discuss your options or check out our mortgage calculator to look for a new deal.

If you have a Follow on Rate (FoR), Standard Variable Rate (SVR) or Tracker Rate Mortgage your monthly payments will probably increase in line with the Bank of England Base Rate change, this is at your lenders discretion. If you have not already received a payment change letter with full details of how the Bank Rate change will affect your mortgage from your mortgage, then you will receive one shortly. If you are considering remortgaging or changing the mortgage you are on to find a better deal, ensure that you check whether there are penalties or charging to ending your mortgage early.

If you’re not sure what type of mortgage you have, it will tell you on your original offer letter, on your annual statement or any online mortgage portal pertaining to your mortgage.

If you’re in any way worried about the change of base rate or your ability to repay your mortgage, contact your lender as soon as possible and they will discuss options with you and offer full support.

And as always, please remember that your home may be repossessed if you do not keep up repayments on your mortgage.

if you would like us to review your options in light of the increase in base rate please call us or contact us for a free no-obligation discussion.