The Bank of England’s Monetary Policy Committee met on 5 May 2022 and agreed to increase the interest.
The current Bank of England base rate is now 1%
What is the base rate?
The Bank of England base rate sometimes referred to as ‘base rate’ or ‘interest rate’ is the single most important interest rate in the UK. It influences the interest rate paid to high street banks and the rates that these banks charge people to borrow money or earn on their savings.
Will this increase affect my mortgage repayments?
When, and if, your mortgage repayments are affected by the interest rate change will depend on what type of mortgage you have and if you have a mortgage deal, when your current deal ends.
You could see an immediate change in your mortgage repayments if you have a variable rate tracker mortgage, linked to the Bank of England base rate. If you’re on a standard variable rate mortgage then you’ll probably see an increase in your rate in line with any interest rate rise, but this is determined by your lender. If you’re not sure, check your mortgage terms and conditions.
If you’re on a fixed rate mortgage then your mortgage payments will only change once you reach the end of your current deal.
Work out how the interest rate rise will affect you
First you need to know what mortgage deal you’re on so you can see how this rate rise will affect your finances.
So if you’re a mortgage holder then:
- Dig out the details of your current mortgage
- See how your mortgage rate is calculated and whether it’s linked to the Bank of England base rate
- Check when your current deal ends
- See if there are any penalties if you want to end your current deal early
You can use calculators such as the MoneySavingExpert Calculator to work out the impact of the rate increase on your mortgage payments.
Work out your budget
Can you afford an increase in your mortgage payments? A Budget calculator can help you see if there are any expenses you might be able to cut back on, to free up some income if your mortgage payments do increase because of the rate rise.
If the type of mortgage you’re on means that your mortgage payments are likely to increase in the future, then you could start building up a savings buffer if you can, to help you afford your mortgage payments.
If you’re worried about your mortgage payments then the first step is to speak to your lender. They want to help you meet your repayment and can discuss what options are available to you.
You could also contact The Citizens Advice Bureau for support and advice.
Make sure you’re on the best deal
If your current deal is coming to an end then you should be looking to see what mortgage deals are available. It’s important to get the right mortgage that meets your needs and budget and a mortgage advisor can help. They can search the mortgage markets to find the right deal for you - doing the hard work for you.
The mortgage markets are constantly changing, so even if you’ve got some time left on your current deal then it might be worth speaking to an advisor to see if you’re still on the best deal for you. Remember, you may have to pay an early repayment charge to your existing lender if you remortgage.
Fee-Free Mortgage Advice Service
If you’re looking for mortgage advice, then the Fee-Free Mortgage Advice Service provided by Tenet Mortgage Solutions Ltd could help. Their expert mortgage advisors have independent access to the mortgage market and will guide you through the process from enquiry to completion.
A mortgage is a loan secured against your home. Your home may be repossessed if you do not keep up repayments on your mortgage. You may have to pay an early repayment charge to your existing lender if you remortgage.
You can find out more
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