What does the Bank of England base rate increase mean for me?

The Bank of England has increased the base rate. What does this mean for you?

What happened?

The Bank of England has been raising interest rates since early 2022 to try and curb spiralling inflation, which was expected to hit 11% in the same year. As a guide inflation is expected to be around 2% each year, so it’s a huge jump. Read on to find out what the base rate is, how it impacts you and what you can do about it.

What is the Bank of England Base Rate?

The base rate is the interest rate the Bank of England charges other banks and that have money held with them. These lenders then mark that up and lend money to consumers in the form of mortgages, loans, credit cards and car finance. If the bank rate changes, usually lenders change their interest rates on saving and borrowing too.

How do Base Rate changes impact me?

Borrowing money, including mortgages, become more expensive. Rent and other consumer goods often also become more costly.

Talking about mortgages here, those with a mortgage currently on the lenders' variable or tracker rates will most likely see an increase in their monthly payments overnight, with their interest rate increasing in line with the banks. If you're on a fixed-rate mortgage, your payments won't be affected until the fixed period ends, at which point switching to a new deal might be more costly than it was last time you fixed.

Aside from mortgages, if you have credit or finance that doesn't have a fixed interest rate, it's likely that the interest rate could be increased and that debt will get more expensive. Your lender or finance provider will have to let you know if they're increasing your interest rate - So keep an eye out in your emails or for a letter through the post.

What can I do?

For mortgage customers, you should speak to a broker to make sure you're one step ahead of any further interest rate rises. This is the fourth time interest rates have risen this year, so for most people, it's definitely worth future-proofing your mortgage payments against further rises.

For those with other variable lending like some overdrafts and credit cards, you should watch out for a letter from your lender informing you of any new interest rate applicable to your account, and of course, you should always think about paying off your borrowing as soon as possible to make sure you're not paying interest you don't need to - Especially with the new increased rate.

At Hiyve, we're on a mission to make sure you've got the right mortgage for you. The best time to switch to a better rate was before this increase. The second best time to switch to a better rate is now. Economists are predicting more raises throughout the course of this year to slow down inflation which is at its highest rate since 1981.

As always, we'd love to speak with you about your mortgage requirements. Get in touch with us here, or book a free call to chat with a broker here.