Base rate rise: How does it affect my mortgage?

In May 2023, the Bank of England announced an increase to its base rate by 0.25%, rising to 4.50% in the twelfth rise since December 2021. Inevitably, this will affect everyone throughout the UK. So what does it mean and how does it affect your mortgage?

What does this mean?
Approximately 2.2 million people in the UK are on variable rate mortgages, either on a base rate tracker, discounted-rate deal or a standard variable rate (SVR). For those on a tracker, directly following the base rate, payments will soon reflect the full rise. SVR’s change at the lender’s discretion, although most will go up.

Over 6 million mortgages are on fixed-rate loans. For those on a fixed-rate mortgage, the base rate increase won’t affect their deals until they come to the end of their product term. For some that might be in a few years’ time, for others this could be in the coming months or weeks.

How will it affect my mortgage?
We are well into 2023 and as the squeeze on cost-of-living continues, it may seem like your finances are restricted. If you are one of the 6 million UK homeowners on a fixed-rate mortgage, you won’t have to consider a change
until the end of your deal so there is plenty of time to
plan ahead. The base rate rise could lead to everyday
items becoming cheaper, helping you save a few pennies.

What about new mortgages?
It’s been a challenge for many searching for new fixed-rate mortgages, whether for their first property or replacing
a deal. Despite lenders gradually reducing the cost of their fixed rates, there are best-buy deals available that are cheaper. You may be tempted to wait for rates to fall, but trying to predict interest rates could cause problems.

To find out more or to discuss the options available for your circumstances, get in touch with one of our friendly advisors.

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