The Bank of England has raised the base rate for the first time in more than a decade, meaning higher mortgage costs for millions of homeowners on variable rate deals.
After weeks of speculation that an interest rate rise could be imminent, the Bank’s Monetary Policy Committee voted to increase rates from 0.25% to 0.5%. The rate has been at 0.25% for over a year, having been reduced to this level in August last year following the UK’s referendum vote to leave the EU.
Mortgages which are directly linked to Base Rate, typically tracker deals, should see the full quarter percentage point increase passed on, most likely at the start of December.
A homeowner with a £200,000 repayment mortgage tracking at 1.5% above the Base Rate will see their monthly payments go up by almost £25 a month. Our Rate Change calculator can help you work out how much extra you might have to pay.
Those on their lender’s standard variable rate (SVR) will have to wait and see how much their mortgage rates increase by. Some lenders may pass on the increase in full, whilst some may raise rates by more or less than this, or, if you’re lucky, not at all.
We’ll let you know who’s raising rates and when with our SVR Watch, so keep an eye on it to see how you might be affected.
If you are currently on your lender’s SVR, bear in mind that even if they don’t pass on the increase in full, there are usually much better deals available. According to our research more than 4m homeowners are paying the SVR, despite the fact switching to a cheaper deal could potentially knock hundreds, or potentially thousands, of pounds a year off mortgage costs.
Bank of England raises interest rates