The increase is the 11th consecutive rise in rates since December 2021, as the Bank battles to dampen double-digit inflation and bring it nearer to the Government’s 2% inflation target.
However, the rate increase means more mortgage misery for homeowners, many of whom are already struggling to make ends meet due to soaring living costs.
Here, we explain what the latest rate rise means for you, and some of the steps you might be able to take to make mortgage payments more affordable.
What it means for your variable rate mortgageHomeowners with variable rate mortgages are likely to feel the impact of higher rates very soon, with those on tracker mortgage deals typically seeing higher payments from next month. Borrowers on their lender’s standard variable rate or other types of variable rate may also see increases passed on, although it’s down to individual lenders to decide how much of the rate increase they will pass on.
Those on standard variable rates who are worried about rising costs should look into remortgaging as soon as possible, as SVRs tend to be more expensive than alternative mortgage rates. A mortgage broker can talk you through all the available options and help you find the best deal to suit your circumstances.
If you’re on a fixed rate dealIf you’re currently locked into a fixed rate mortgage, the latest hike won’t have any impact on your mortgage payments now. However, bear in mind that when you come to remortgage, you may face a jump in payments, as fixed rates have risen sharply in recent months.
If you can afford to, it may therefore be a good idea to try and make overpayments while you’re still on a low rate, so that you can reduce your mortgage and minimise the impact of higher rates when you come to remortgage.
Most lenders will allow you to repay up to 10% of your mortgage balance each year without penalty, although some enable you to pay back as much as 20%, so check your mortgage’s terms and conditions to see how much flexibility you have . You can use our overpayment calculator to help you work out how much overpaying each month could save you.
If your fixed mortgage rate is due to finish in the next six months, it’s worth exploring which deals you might be able to remortgage to sooner rather than later. If you find a deal you like, you can usually secure it up to six months before your current deal ends, giving you a bit of time to prepare for higher payments. If mortgage rates fall before your new deal is due to start, you’ll still be able to switch to an alternative deal if you want to. Our Mortgage Finder tool can help you search for and compare the best remortgage deals both from new lenders and your existing lender.