The Bank of England has increased its Base Rate from 0.50% to 0.75%

The Bank’s Monetary Policy Committee voted by a majority of 8-1 to increase Bank Rate by 0.25 percentage points, to 0.75%.

The Bank also said it expects inflation to increase further in the coming months, ‘to around 8% in 2022 Q2, and perhaps even higher later this year’ according to its latest Monetary Policy Summary.

It added that ‘some further modest tightening in monetary policy may be appropriate in the coming months’.

In other words, interest rates could rise further.

What does it mean for borrowers?

The majority of mortgage borrowers are on a fixed rate mortgage, so they won’t be immediately affected by the change in wider interest rates.

Although, when you come to the end of a fixed rate deal, you could find that the new rates on offer are higher than when you last took out a mortgage.

Borrowers on a tracker rate will see their interest rate rise in line with the Base Rate rise by 0.25 percentage points, usually within a month.

Variable rates – including standard variable rates and discounted vairabler rates – are also likely to increase. although this is at the lender’s discretion.

Iain McKenzie, CEO of The Guild of Property Professionals, said: “The country is in the midst of a cost of living crisis, with the price of household bills and essential goods rising across the board.

“The Bank of England has increased interest rates to pre-pandemic levels in a bid to get inflation under control. This will come as unwelcome news to millions of people on tracker mortgages or variable rates that will feel another squeeze on their finances.

“Those on fixed-rate mortgages are safe for now, but consumers should keep an eye on interest rates in case their deal is up for renewal soon. Our research indicates that about 1.5 million fixed-rate mortgages are expected to end this year and next.

“All the latest figures continue to show that house prices are climbing across the UK, with strong demand in many areas driving this upward trend. Prices have increased 20% since the start of the pandemic and the industry has been expecting a readjustment for a while.

“It remains to be seen whether another interest rate rise will dampen the demand for properties and deter first-time buyers worried about mortgage payments. Prospective buyers will need to find a way of balancing their finances to afford the rising cost of living, if house price growth doesn’t cool down enough for their budget.”