Bank of England Raises Rates: Impact on Mortgages

Estimated reading time 6 minutes

The Bank of England have raised the base rate from 4.25% to 4.5% and as a result banks and building societies are adjusting the interest rates to be applied on their current and future mortgages.  The impact on your mortgage rate will depend on what type of mortgage you have.

How will my mortgage be affected by the Bank of England rate rise?

The combination of rising interest rates and inflation is challenging to everyone and with the cost of living continuing to rise homeowners are facing huge financial strains.

If you are due to renegotiate your fixed rate agreement, chances are you will be in for a shock as mortgage rates offered now are more than double the rates available two or three years ago. If you’re close to the end of your current term, you might want to search for a new mortgage deal now as you can usually lock in a mortgage offer three to six months ahead of time.

Below we cover the impact of the rate rise on current mortgage holders.

Fixed Mortgage Rate

If you have a fixed rate mortgage nothing will change as your monthly payments stay the same until the end of your fixed deal.

Tracker Mortgage Rate

If you have a tracker mortgage the interest rate will increase to reflect the base rate change.  Your mortgage company will write to let you know what your new interest rate and monthly payments will be.

Standard Variable Mortgage Rate (SVR)

If you have a standard variable your mortgage company will write to let you know whether the increase in the base rate is going to impact you. SVR is a managed rate not a tracker rate which means that the Bank of England base rate may not always result in a change to the SVR. If your mortgage is affected they will write to tell you how and when this will impact you.

Why does the Bank of England raise interest rates?

The Bank of England raises interest rates for several reasons, which are typically aimed at managing the economy and achieving its monetary policy objectives. The recent rase was an attempt to reduce the UK’s annual inflation rate, which now sits at 10.1% which is well above the target of 2%.

Here are some common reasons for raising interest rates:

  • Controlling inflation
  • Maintaining price stability
  • Managing economic growth
  • Managing exchange rates
  • Addressing financial stability concerns

It’s important to note that the specific reasons for raising interest rates can vary depending on the economic conditions, policy objectives, and central bank’s assessment of the situation.

When will the Bank of England raise interest rates again?

The Bank of England’s Monetary Policy Committee (MPC) regularly meets to assess these factors and make decisions regarding interest rates. Their decisions are based on the most up-to-date economic data and analysis available at the time. These meetings typically occur at regular intervals throughout the year, but the actual timing of rate changes depends on the prevailing economic conditions and the central bank’s assessment of the situation.

Currently, the financial markets are now pricing in that the Bank of England base rate will rise to almost 5% by August 2023.

What could you do next?

Is refinancing an option?

If you have decided after looking at your refinancing options that you would prefer to sell your property. Gaffsy buys houses for cash quickly; we prioritise simplicity, transparency, and trustworthiness in all our transactions making selling your house with a mortgage to Gaffsy a convenient and hassle-free option to consider. As a member of the Property Ombudsman and NAPB, Gaffsy can also provide you with an extra layer of reassurance and professionalism. Contact us today for your free cash offer.

Are you in mortgage arrears?

If you have found yourself in arrears check out our guide What Can I Do If I Fall into Mortgage Arrears? You will discover that Gaffsy can still buy your house by working with your lender to ensure the mortgage is paid off and any arrears are covered. We can also step in and buy a house quickly before any CCJ comes into effect.

Do you want to downsize?

If after this latest base rate rise you are considering downsizing to a more affordable home, and eliminating the worry of falling into arrears consider selling your house to Gaffsy. We will provide you with a no obligation cash offer today. As a cash house buyer we can work in a time frame to suit you We pride ourselves on having a transparent selling process and completely tailor our property buyers service to suit each client.

Are you a landlord?

You may be asking yourself after this latest rate rise is buy to let still worth it? The simple answer is if the rental income no longer covers the costs that are associated with the property, then unless you can increase the rent, the answer your is probably not. If you have reached this conclusion, give Gaffsy a call on 0207 459 4546  we can provide you with a no obligation cash offer today.  Similarly, if you just decide you no longer want exposure to this market we buy any house regardless of its location, size, and condition. We can work with you to help you sell your flat fast, even if it isn’t your primary residence.

Do you own an inherited property?

Have mortgage rates gone up again whilst you have been waiting to secure a grant of probate? Probate house sitting empty?  Grant of probate just come through?  Don’t want to incur further mortgage repayments? Gaffsy can make selling your probate home quick and simple, we don’t need you to fix up the property, we don’t need multiple viewings and we buy any house in any condition for cash. This means there is no waiting around for mortgage approvals, no property chains and we can buy your probate house fast, we don’t charge a fee, we even cover your solicitor costs and there is an instant pay-out after finalising the sale.

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