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Bank of England raises interest rates AGAIN

Christina Hoghton
Written By:
Posted:
16/06/2022
Updated:
16/06/2022

The Bank Rate now stands at its highest level for 13 years

The Bank of England’s Monetary Policy Committee has voted by a majority of 6 to 3 to increase the Bank Rate to 1.25% from 1% – a rise of 0.25 percentage points.

The three members who voted against the measure actually wanted to increase the Bank Rate by a greater amount of 0.5 percentage points.

The Bank Rate now stands at its highest level for 13 years – up from just 0.1% at the beginning of December last year.

The move has been made to curb inflation which rocketed to 9% in April and is expected to rise to 11% or more later this year, said the Bank of England.

It suggested further rises were likely, stating in its summary report that ‘the scale, pace and timing of further increases would reflect the Committee’s assessment of the economic outlook and inflationary pressures’.

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What does it mean for mortgage borrowers?

If your rate is not fixed you are likely to see a rise in your monthly mortgage payments. This applies to those on a standard variable rate mortgage, discounted rate mortgage or tracker rate.

According to Hargreaves Lansdown, someone with a £300,000, 25-year, repayment mortgage on the average SVR could see their monthly payments go up by over £40 a month.

Borrowers on fixed rate mortgages will see no change. However, when their current mortgage deal is up they may find that the new rates on offer to them are higher than their existing deal.

Iain McKenzie, CEO of The Guild of Property Professionals, said: “Homeowners on fixed-rate mortgages are currently in the safest position, as this interest rate rise won’t affect them for the time being. It is important to keep track of when your fixed rate is up for renewal and be ready to secure a new deal.

“Our research indicates that around 1.5 million fixed-rate mortgages will end this year and next, so these interest rate rises will soon affect you when the time comes to renew.”

Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, added: “Not all mortgages are rising as quickly as the Bank of England base rate, because the big banks are still sitting on so much lockdown savings that they can afford to fund cheaper deals. So for the dedicated mortgage hunter, there are still some affordable mortgages around.

“Even among those banks who are hiking rates, the threat of a recession lurking further down the line means rate expectations are lower when you look a few years down the track. It means banks are expecting rates to rise, then fall, so they’re offering plenty of cheap five-year mortgages. As a result, the gap between the rates on two-and five-year fixes has narrowed significantly, so it’s worth considering fixing for longer if you want to have more certainty over your outgoings in the years to come.”