The Monetary Policy Committee at the Bank of England announced it has voted by a majority of eight to one to increase its base rate by 0.50 percentage points to 1.75%.

That’s the biggest single rise to interest rates in 27 years and follows five other base rate rises since December 2021, when the base rate stood at just 0.1%.

So, what does it mean for your mortgage payments?

On a fixed rate: If you are currently on a fixed rate mortgage your rate won’t change until the end of your current deal.

At this point you will automatically move onto your lender’s standard variable rate – which will have already gone up this year – unlesss you remortgage to a new deal.

Even if you do remortgage, rates on new deals are now significantly higher than they were six months ago, and potentially higher than you are currently paying.

Average two-year fixed rates are currently 3.95% and five-year rates are 4.08% according to Moneyfacts, but both could rise in the next few weeks as a result of today’s decision.

On a variable rate – including discounted variable rates, standard variable rates and trackers : If you are on a variable rate that goes up and down with wider interest rates your pay rate is likely to go up within the next month, on top of previous increases you’ve already faced in 2022.

Your lender will contact you in the coming weeks with details of your new pay rate and monthly repayments.

If you are able to remortgage (if you are on a standard variable rate or within three months of the end of your existing deal) it’s worth considering switching to a fixed rate mortgage.

Time to remortgage?

According to Moneyfacts, borrowers sitting on a standard variable revert rate (SVR) who want to shield themselves from a rise in mortgage repayments could stand to save a decent sum by switching to a fixed deal.

It said the difference between the average two-year fixed mortgage rate and SVR stands at 1.22%, and the cost savings to switch from 5.17% to 3.95% is a difference of approximately £3,333 over two years.

A rise of 0.50% on the current SVR of 5.17% would add approximately £1,400 onto total repayments over two years.

Rachel Springall, finance expert at Moneyfacts.co.uk, said: “Borrowers who have not locked into a fixed rate would be wise to move quickly to secure a new deal as interest rates continue to climb. Fixing for longer may be in the mindset for some, as there is anticipation for further base rate rises to come. Consumers will find that the average five-year fixed rate has breached 4%, and the rate gap between this and the average 10-year fixed rate has closed in since December 2021.

“The cost of living crisis, interest rate rises and house price growth could price out would-be buyers if they have little disposable income and subsequently eat into their savings. On the other hand, remortgage customers may find they have more equity in their home but will need to get some independent advice on whether they can comfortably afford to switch their deal.”

Brian Murphy, head of lending at Mortgage Advice Bureau, agreed: “New and existing borrowers should seriously consider locking a fixed term deal to protect them from any further rate rises. With economists predicting inflation to soar even higher, interest rates may well follow suit for a while longer.

“Approximately two million people are on variable rate mortgages and will subsequently see an immediate impact on their monthly mortgage repayments.

“While those on fixed rate deals will be sheltered from interest rate rises for the duration of their mortgage term, around half are expected to expire in the next two years. Some may therefore consider lengthening their mortgage terms or even overpay on their mortgage to help them with payments over the long term. Speaking to a whole of market mortgage broker, however, can help figure out the best options based on your personal circumstances.”