The Bank of England has increased its Base Rate from 0.25% to 0.50%.

The Monetary Policy Committee at the Bank voted by a majority of 5-4 to increase the rate to 0.5% (the four that voted against the move actually wanted to go higher).

The Bank said it could hike the rate again, stating that its projections are based on a ‘path for Bank Rate that rises to around 1.5% by the middle of 2023’.

This week’s increase follows a rate increase in December 2020 from 0.1% to 0.25%.

What does it mean for borrowers?

The majority of mortgage borrowers are on a fixed rate mortgage and therefore 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.

Rachel Springall, finance expert at Moneyfacts.co.uk, said: “Mortgage rates are on the rise, and this base rate rise may come as disappointing news to borrowers who are not locked into a competitive rate. Lenders are still launching attractive deals onto the market, so anyone who is still debating on whether to fix may be wise to do so now.

“Borrowers who are sitting on a standard variable revert rate could stand to save a significant sum on their repayments by switching to a fixed rate.

“Those borrowers who may be sitting on their standard variable rate (SVR) for a few months could have already seen an increase since the December base rate announcement, but in the months to come they could see it rise further still due to the latest rate rise decision.

“The difference between the average two-year fixed mortgage rate and SVR stands at 2.02%, and the cost savings to switch from 4.46% to 2.44% is a difference of £5,182 over two years approximately. A rise of 0.25% on the current SVR of 4.46% would add £684 approximately onto monthly repayments over two years.”