The Bank of England has increased its Base Rate from 4.5% to 5%.

This is the 13th increase in a row as the Bank’s Monetary Policy Committee continues to try to tackle stubbornly high inflation.

The Base Rate has risen from 0.1% in December 2021 to 5% today, sending average standard variable rate (SVR) mortgages from 4.4% to 7.52% over the same period, said Moneyfacts.

After today’s decision variable mortgage rates are likely to rise further. In fact, Moneyfacts calculated that a rate rise of 0.50 percentage points on the current average SVR of 7.52% would add approximately £1,576 onto total repayments over two years (based on a £200,000 25-year mortgage).

Fixed rates up

Average fixed rate mortgages are up too, and could rise further.

Moneyfacts said the average two-year fixed rate is now 5.49%, up from 2.34% in December 2021, at the start of the 13 rate rises.

Average five-year fixed rates have risen to 5.17% from 2.64% over the same period.

Rachel Springall, finance expert at Moneyfactscompare.co.uk, said: “Borrowers may be deeply concerned to see another base rate rise, particularly if they are sitting on a Standard Variable Rate (SVR) or are about to come off a low fixed rate. Amid a cost-of-living crisis, rising interest rates can have a devastating impact on borrowers who are already struggling to cover their monthly essentials and could well lead to a rise of ‘mortgage prisoners’.

“Those borrowers who are still on a competitive fixed rate deal for a few more years may want to consider overpaying their mortgage to reduce the size of their loan. However, those aiming to refinance on a fixed mortgage right now will find rates are around three percentage points more than they were a year ago.”

What should borrowers do?

If you can’t pay your mortgage, speak to your lender as soon as possible. They will look at your individual circumstances and provide options for you, from extending your mortgage term to moving temporarily to an interest-only mortgage, both of which could reduce your monthly repayments.

There is also very limited government support available with Support for Mortgage Interest, but this has strict eligliblity criteria that means it isn’t available to many borrowers.

If you are coming to the end of a fixed rate mortgage, you need to shop around for a new deal.

But of course, new fixed rates will be higher than you have been used to paying – maybe even double. Find out what switching options your existing lender can offer you and seek advice from an independent mortgage broker, who will look across the market to see what is on offer.

If you are currently on a variable or tracker rate and able to switch without penalty, you may want to consider locking into a fixed rate mortgage, but this depends entirely on your finances, preferences and circumstances. Again it’s worth seeking advice from a qualified mortgage broker.