The Rise of Bank of England Base Rate: How Will it Impact Your Mortgage?
Recently, the Bank of England has announced a further increase in its base rate from 3.5% to 4%. This 0.5% increase can have a significant impact on homeowners and those who are currently looking to take out a mortgage. Here at Flagstone, we will cover the key topics to help you understand how the rise of Bank of England base rate might affect you.
How will the rise of the Bank of England Base Rate affect me?
The impact of the Bank of England interest rate rise on your mortgage will depend on the type of mortgage you have. If you have a Standard Variable Rate (SVR) it means you are not tied to the Bank of England base rate. However, many lenders tend to follow the changes in the base rate and adjust their SVR accordingly. As a result, homeowners with SVR mortgages may also see an increase in their mortgage rate and monthly repayments.
If you have a tracker mortgage, the interest rate on your mortgage will usually follow the Bank of England base rate. This means that if the base rate rises, your mortgage rate will also increase, leading to a higher monthly repayment.
The interest rate for fixed-rate mortgages will remain the same, regardless of any changes in the Bank of England base rate. This type of mortgage provides stability, as you will know exactly what your monthly repayments will be for the length of your fixed-rate period.
Discounted rate mortgages are similar to tracker mortgages, as the interest rate is tied to the SVR. However, instead of following the base rate exactly, the interest rate is discounted for a set period of time. If the SVR rises, the discounted rate may also increase, resulting in a higher monthly repayment.
What Will Interest Rates be in 2023 and 2024?
It is difficult to predict the exact interest rates for 2023 and 2024.
Rates have reduced – largely because current chancellor Jeremy Hunt reversed most of the proposed measures in the September mini budget – and many lenders are still reviewing their prices. So far in 2023 we have seen most lenders reduce various mortgage packages.
The recent rise in the Bank of England base rate may have a significant impact on homeowners and those looking to take out a mortgage. However, many lenders have already taken into account the recent Base Rate change which is not as high as many predicted. This means that rates may come down. The impact will depend on the type of mortgage you have, whether it be a tracker mortgage, fixed-rate mortgage, SVR mortgage, or discounted rate mortgage. It is important to regularly monitor interest rate changes and discuss with our team of experts to understand the impact for on you. Overall, the news is good and according to industry leading analysts this in now likely to level out and not reach the predicted heights of 6%.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.