The Bank of England has raised the base rate to 0.75%, meaning higher monthly mortgage costs for millions of homeowners on variable rate deals.
There had been some expectation of a rise in May, but weak economic data saw the Bank decide to hold rates. Although June saw rates held again, the majority reduced in a 6-3 split, and as a result many saw this rate rise as a matter of when, not if.
The last time rates rose was in November last year, when they increased from a record low of 0.25% to 0.5%. Rates had fallen to 0.25% in August 2016 following the vote for Brexit in June that year.
What the rate rise means for you
If you’re on a tracker mortgage, then the quarter point increase will be passed on in full, most likely at the beginning of September.
A homeowner with a £200,000 repayment mortgage tracking at 1.5% above the Base Rate will see their monthly payments go up by around £25 a month. Our mortgage interest rate calculator can help you work out how much extra you might have to pay.
If you’re currently on your lender’s standard variable rate, it is up to your lender to decide how much, if any, of the base rate increase they will pass on. Some lenders will raise rates by the full quarter percent or possibly more, whilst others may choose to make smaller increases, or not to increase their variable rate at all.
Check our SVR Watch to see if your lender has reacted to the rise yet. Remember that if you are currently on your lender’s SVR, there are usually much better deals available, even if your lender decides not to raise rates. Take a look at our best buys to see if you can find a better mortgage.
If you’re on a fixed rate mortgage deal, you won’t see any change in your monthly payments. However, even though there won’t be any immediate effect, it’s important to remember that rates could be higher when your current deal finishes, so you could face steeper costs when you come to remortgage.
Read how to secure a fixed rate to protect against rising interest rates here.
Bank of England raises interest rates