Latest base rate rise threatens additional mortgage costs

The Bank of England (BoE) has today announced it has increased the base interest rate from its previous level of 1% to 1.25%

The base rate, which determines how much we pay to borrow money as well as how much we get receive as interest on our savings. The base rate is reviewed eight times a year, with the monetary policy committee adjusting rates based on whether it wants to encourage spending or saving.

Until today and since December 2021, the UK’s central bank has increased the base rate four times, increasing it from 0.1 per cent to 1 per cent. The latest rate change to 1.25% signals potential additional costs for those with mortgages.

With inflation now running at 9 per cent, the BoE’s Monetary Policy Committee (MPC), have been under pressure to raise rates even further in order to slow down the UK economy. As it stands inflation is currently at its highest level since 1982, according to data from the Office for National Statistics published last month.

What does it mean for mortgage rates?

When the Bank of England raise the base rate of interest, those with variable rates mortgages see their rate and mortgage payment increase as Lenders’ rates typically increase in line with the Base Rate.

Those on fixed deals will not be affected until their fixed period ends and their mortgage moves to the variable rate.

Whilst those with fixed rates with continue to enjoy their current rate and payments for now, it is really important to understand, when they start shopping for a new scheme or look to borrow more, they might find rates are higher than when they last fixed.

Andy McBride, Managing Director at Cleerly said “My advice would be to engage with your Mortgage Broker sooner rather than later. Your Mortgage Consultant will be able to review you situation and devise a plan around when and how to start looking at new mortgage offerings.”

Mortgage renewal not due imminently?

For those clients that have more than 12 months remaining on their current mortgage product Cleery run a Pro-Active Mortgage Management System (PAMM). Our PAMM system will monitor your situation and allow us to contact you at the opportune time to ensure you have peace of mind that you will be contacted when you mortgage is due for renewal.

To discuss you mortgage requirements or be added to the PAMM system, simply call the team today.

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