Bank of England raises interest rates for first time in over 3 years

The Bank of England’s Monetary Policy Committee (MPC) voted 8-1 to raise the base rate by 0.25% today, taking it to 4% - the first increase since August 2023. One member voted for a 0.50% increase, making it a unanimous vote to increase.

For many mortgage borrowers, the impact won't be immediate, as their rate is fixed. However, those on tracker mortgages or approaching the end of a fixed-rate deal should expect to see higher borrowing costs in the months ahead.

Here's what today's decision means for your mortgage and the steps you can take now.

At a glance

• Fixed-rate borrowers won't see an immediate increase in monthly payments
• Tracker mortgage rates should rise in line with today's increase
• Borrowers on Standard Variable Rates (SVRs) could also see their payments increase
• It’s possible to secure a new mortgage deal up to six months before your current one ends
• Taking action early could help protect you against future rate rises

What does the increase mean for you?

Fixed rate borrowers

If you’re currently on a fixed rate mortgage, the good news is that there’s no immediate change to your monthly payments. However, if your deal is coming to an end in the next few months, you should be prepared for the possibility of moving onto a higher rate when you come to remortgage.

If you’re approaching the end of your deal now is the time to be reviewing your options. Most lenders allow you to secure a new mortgage deal up to 6 months in advance, giving you peace of mind by protecting you against any further rate rises while still allowing you to switch if rates improve before you complete.

Tracker rate borrowers

If you’re on a variable rate that tracks the Bank of England base rate, your mortgage rate will increase in line with today’s increase, and your monthly payments will typically rise from the following month.

Variable rate borrowers

If you’re on your lender’s Standard Variable Rate (SVR), it will be up to your lender to decide whether they pass on the increase. Lenders can elect to pass on the rate cut but could potentially hold or even increase their rate by a larger amount. It’s likely that most people should expect to hear that their payments are due to rise over the next month or two.

Variable rates are typically higher than fixed or tracker rates, so shopping around and switching to a lower rate could result in significant savings.

You can keep an eye on any changes to your lender’s SVR by checking our SVR Watch page.

Don’t leave it to the last minute

Rate rises can feel worrying, but taking action early will give you time to understand what’s available and help you avoid making last minute decisions.

If you’re unsure about the next steps, speaking to a mortgage adviser can help you make sense of the market and find the right deal to fit your circumstances.