Those of you that read our weekly articles here at Mortgage Required will recall that we warned of the widely-predicted rise in the Bank of England Base Rate back in the first quarter of 2018.
Well, this week it has happened. But what will this mean for you?
Why the Rise?
The first thing to remember is that a rise in interest rates is usually one of the major anti-inflationary tools in the Bank’s arsenal. The idea is that the economy can be regulated and inflation controlled by increasing the base lending rate. In the past, this somewhat blunt instrument has been quite effective. The economy is considered to be in pretty good shape and, after a decade of printing money, the Bank of England now considers there is a danger of inflation - hence the rise.
As much as the rise, it was the much vaunted increase after a decade of historically low interest rates. The rise from 0.5% to 0.75% is hardly huge, although if your household budget is already on your limit, it might still be painful. I suppose you need to consider that against the potential cost of an inflationary economy where food prices and energy costs rise excessively.
Who is affected?
If you are a borrower with a variable rate or tracker mortgage then you are likely to see an increase in your borrowing costs. By how much? Well, the holder of the average £150,000 variable rate mortgage might see her monthly payments increase by about £19 per month.
The good news is that those of us with fixed rate or capped rate mortgages won’t see that rise, at least not immediately. That’s why we were recommending that those with fixed rate or capped rate mortgages coming to an end start to consider refinancing and locking in those fixed rates.
The other people likely to be affected by changes in interest rates are savers and pensioners - and those on fixed incomes. Savers might see a tiny increase in the interest they receive on their savings, but it’ll likely be negligible. However, those buying annuities are likely to see a more marked interest in the next few months. Those on fixed incomes will be hoping that a rise in interest rates will dampen inflation and keep their monthly expenditure under control.
It’s also worth bearing in mind that with the exception of the last decade, base rates have been at anything up to 15%, so this 0.25% increase is not, in itself, very worrying. The trend, if there is one, might be worth preparing for and one way to shield yourself is to always be considering when it might be a good time to refinance or restructure your debt, whether that be a credit card, overdraft or mortgage.
Whatever your circumstances, contact us on 01628 507477 to discuss your needs.
Related articles:
Download our Free First Time Buyers Guide
Recent posts
Lloyds Banking Group has jumped on the bandwagon to boost lending for first-time buyers as they allocate an additional £4 billion to help first-time buyers on to the property ladder.
As the Loan to Income (LTI) cap has been increased to 5.5 times income, applicants who fit the First Time Buyer Boost criteria could borrow up to 22% more.
The government is introducing mortgage reforms to boost homeownership, stimulate economic growth, and make the housing market more accessible, especially for first-time buyers.
Chancellor Rachel Reeves has announced the most significant mortgage reforms in over a decade—great news for those dreaming of homeownership.
Nationwide ease their ‘Helping Hand’ mortgage designed to help first-time buyers get onto the property ladder by allowing them to borrow up to six times their income.
Ways to save money over the summer holiday
9 days ago
Keeping the kids entertained over the six-week summer holidays isn’t always easy, especially with the cost-of-living making it even more difficult. Below is a list of fun, inexpensive ideas to do over the break
The Financial Conduct Authority (FCA) has published a discussion paper about the future of the mortgage market in a bid to improve access for first -time buyers, self-employed, and those borrowing in retirement.
Ever wondered where the most reasonably-priced towns for families to buy are? Property company, Zoopla has identified the top 10 towns for families to live in the UK by looking at the most affordable towns, and how many people are looking in that area.
Increase in zero-deposit mortgages in 2024
18 Jun 2025
There was a 32% increase last year in 100% loan-to-value (LTV) mortgages which are mortgages that require zero deposit. According to a recent report by chartered accountants and business advisers, Lubbock Fine, the reason behind this is buyers simply struggling to save enough for a deposit.
Average savings by age in the UK
17 Jun 2025
Many people are quite private when it comes to what is in their bank account. In this short blog, we look into what Brits have saved by age group.
More information
Trusted by
