On November 2nd, the Bank of England increased the base rate from 0.25% to 0.5%. This is the first increase in over ten years and could pave the way for further increases in the not-too-distant future.
In reference to this, the Monetary Policy Committee has said: “Any future increases in interest rates would be at a gradual pace and to a limited extent.”
What is the Base Rate?
Put simply, the base rate is set by the Bank of England Monetary Policy Committee and is the official interest rate used by Banks and Building Societies to calculate the rates for their products (mortgages, savings accounts etc.). Often, when the base rate goes up, so does the interest you pay on loans and mortgages, and the interest paid to savers.
Will All Mortgages be Affected?
No, it will depend on the type of mortgage you have.
Those on a tracker mortgage will see an increase of 0.25% as tracker mortgages (as you may expect) follow the base rate.
People on a standard variable rate (SVR) mortgage, your rate is set by your lender and is likely to rise. Most providers indicate that their SVR mortgages will see an increase of 0.25%, although many won’t change their rate until December 1st. This will be dependant on your mortgage provider and you should check with them to find out your rate will be affected.
Fixed-term mortgage holders won’t see any immediate change. Your rate will remain the same for the remainder of the agreed term, however, when your fixed term comes to an end, you may find that the product you are moved to is more expensive than you anticipated.
How Will First-Time Buyers be Affected?
If you don’t already have a mortgage and are looking to get on the property ladder, then this news isn’t great for you. It’s likely that many of the best recent deals will be withdrawn and replaced with higher-priced products. However, the increase isn’t huge, so you shouldn’t have to pay too much more than you would have at the old rate. An independent advisor can help you to find the best deals across the whole of the market.
It’s Not All Doom and Gloom
Although the increased base rate will see a lot of the best recent deals withdrawn, there are still plenty of attractive mortgage products available. As an independent advisor, we have access to all the available deals at any given time. So, if you’re looking to buy your first property or remortgage your current one, it’s worth having a chat with us about your options. This way, you can be confident that you’re getting the best possible value!
To learn more about our new Southport office, take a look at our press release on Lancashire Business View.
