The base rate was last higher than 1% in January 2009, when it stood at 1.5%. It was reduced to 1% in February 2009 and then to 0.5% the following month to support the economy during the financial crisis at that time.
The latest increase is the fifth consecutive rate rise since December, as the Bank continues to try to get soaring inflation under control.
Record high petrol costs, energy bills and steeper food bills pushed inflation to 9% in April, as measured by the Consumer Prices Index, more than four times higher than the government’s 2% target. Last week the British Chambers of Commerce forecast that inflation would reach 10% in the final three months of this year, whilst UK economic growth would “grind to a halt.”
What higher rates mean for your mortgageAnnual mortgage costs have already risen by £1,500 over a year based on a typical £150,000 repayment mortgage, according to our research, with the latest increase set to push costs even higher.
The averages of the best two and five-year fixed rate remortgage deals at a 60% loan-to-value were at just 0.89% and 1.05% respectively in October 2021 but 2 year has now trebled to 2.71% and 5 year increased to 2.78% in June. Those hikes could only increase further following the latest base rate rise.
If you’re looking to remortgage, it therefore makes sense to review your mortgage as soon as possible if you want to avoid a sharp increase in payments. You can usually secure your next deal up to six months before your current mortgage deal ends, so you don’t have to wait until it’s finished before you start your mortgage search.
If you’re currently on your lender’s standard variable rate, the good news is that even though interest rates are on the way up, you should usually be able to cut hundreds or sometime thousands off your monthly costs by remortgaging to a fixed, tracker or alternative mortgage deal.
Our Online Mortgage Finder tool can help you search thousands of different deals from across the market and see how much you could save.