BoE increases the base rate to 0.5%
On 3rd February 2022, the Bank of England (BoE) announced a further base rate increase from 0.25% to 0.5%. This is the second interest rate rise in less than three months with the aim of halting surging inflation.
How the base rate rise will impact mortgages
“This latest announcement comes amid soaring energy bills and increased pressure on the family weekly budget. With prices rising at the fastest rate of 30 years, it comes as no surprise that the Bank of England has acted to try and curb inflation.
“The hope is that, if the BoE increases the base rate to 0.5%, it will make borrowing more expensive which will help to curb spending and drive down prices.
“However, if borrowing is more expensive, this could mean higher mortgage costs. Which could be a worry to my clients.”
How should home owners act?
“The main thing I would say is not to panic. Although it is predicted that the BoE will continue to increase the base rate throughout 2022, it is expected to be slow and steady rather than dramatic. With predictions that the rate could reach 1.5% in early 2023.
“Added to this, most of you won’t be immediately impacted. According to the BBC**, 74% of those with mortgages are on a fixed rate arrangement. This means that even as the BoE increases the base rate to 0.5%, your repayments will only change once your current deal comes to an end.
“It’s a different picture if you have chosen a tracker mortgage or you are on the Standard Variable rate. It is likely that your monthly repayments will increase.
“If you are on standard variable rate or your fixed term deal is coming to an end, we would recommend you act now to secure a new deal. The Bank of England is likely to increase the base rate slowly and steadily over the forthcoming year, so delaying is unlikely to be a wise move.
“We will, of course, be watching the markets carefully. If you want the latest information and the most informed across market understanding, we would recommend you speak to an impartial mortgage broker like Your Mortgage Expert.”
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The information contained within this article was correct at the time of publication. It is intended for information only and does not constitute advice. Your Mortgage Expert Ltd and Mortgage Advice Bureau cannot be held responsible for information that was correct at the time of publication but subsequently changes or goes out of date due to changes in legislation.
**source : https://www.bbc.co.uk/news/business-59140059