Bank of England increase base rate to 4.25%

In this blog, we will explore the reasons for today’s base rate increase and how it may impact homeowners with mortgages on both fixed and tracker rates.

Why has the base rate been raised?
The main reason for today’s base rate increase is to control inflation, which was recorded at 10.4% on 22 March 2023. Inflation, which had been steadily falling since November 2022, was hit with a surprise increase in February due to the fruit and vegetable shortage experienced in the UK. By increasing the base rate, the MPC hopes to slow down consumer spending, which can help to curb inflation and bring it back down to the government-set target of 2%.
If you’re interested in keeping an eye on the current inflation rate in the UK, you can do so on the Bank of England website here.

How might today’s Bank of England (BoE) announcement impact you?
Fixed Rate Mortgage Holders
If you’re on a fixed-rate mortgage, the base rate increase will not affect your monthly repayments until after your current fixed rate comes to an end. After this point, you will be switched over to your lenders Standard Variable Rate which is guided by the BoE base rate.
If your current mortgage deal is coming to an end, it may be worth having a chat with one of our expert financial advisers. The general rule of thumb is to look into a new deal up to a year before your current rate comes to an end as you can lock in a rate up to six months before your current deal expires.

Tracker Rate Mortgage Holders
If you have a tracker rate mortgage, your interest rate and monthly payments will be directly affected by today’s base rate increase. You can expect to see an increase in your mortgage payments in line with the increase in the base rate. For example, if your tracker rate is set at the base rate plus 1%, your interest rate will now be 5.25% (4.25% base rate + 1% tracker rate).

It's important to note that the impact of today’s announcement for those on tracker rate mortgages will vary depending on the size of your mortgage and the length of your mortgage term.
If you’re on a tracker mortgage and are unsure about what today’s base rate rise will mean for you, it is worth speaking to one of our experienced mortgage advisers who will be able to look into your options and potentially help you save money on your mortgage. Start a conversation here.

Overview
In conclusion, the Bank of England's Monetary Policy Committee has increased the base rate by 0.25 percentage points to 4.25% to control inflation and maintain economic stability. While this may result in an increase in mortgage payments for those on tracker rate mortgages, there are options available to make payments more affordable. It's important to stay informed and seek professional advice if you are concerned about the impact of the rate increase on your mortgage.

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