The Monetary Policy Committee at the Bank of England has increased the Base Rate to 0.75% – its highest level in almost a decade.

The move was widely anticipated and many lenders had, in fact, already increased their new deals in advance of the news.

According to Moneyfacts 28 providers increased mortgage rates in July alone, taking the average two-year fixed deal to 2.53% (up from 2.33% in November).

In a fix

For existing mortgage borrowers, the impact of the rise depends on whether or not your rate is fixed.

A massive 95% of new lending is now done on a fixed basis and these borrowers will not be affected by the rate increase. Their pay rate is set at an agreed level for a defined period of time, regardless of what happens to wider interest rates.

Borrowers on a tracker rate deal will see their pay rate increase by 0.25 percentage points, usually within a month. That’s because their pay rate is pegged at a set margin to the Base Rate.

Those on variable rates – which include discounted variable rates and standard variable rates – could see their mortgage rate rise but there is no guarantee. Individual lenders will announce any changes to their standard variable rate over the coming weeks.

If you are on one of these deals you should be able to either remortgage to a new deal, or at least switch to a cheaper product with your existing lender.

As Jackie Bennett, director of mortgages at UK Finance, explained: “When costing their standard variable rate (SVR) or reversion rates, lenders are not necessarily led by the Bank of England Base Rate so any increase or decrease in the Rate may not be passed on to borrowers.

“Rates are still at an historic low and borrowers remain well-placed to get a good deal from the UK’s competitive mortgage market. And following an industry-wide agreement announced earlier this week, those borrowers on SVR or reversion rates who were previously unable to switch to a new product with their lender due to stricter affordability criteria now have the option to move to another product.

“Anyone with concerns about managing their mortgage should contact their lender to discuss the advice and support available.”