If you didn’t see the news yesterday, 17th March, the Bank of England has increased the base rate from 0.5% to 0.75%. The base rate, which can also be known as the bank rate, or base interest rate, is an extremely important rate in the UK, and it is essentially used by the Bank of England to control inflation. It can help ease increases in prices of day-to-day costs, such as fuel, food, and clothing.
The Bank of England reviews the base rate to keep inflation rates within the Government’s targets, as it influences people’s spending habits; people start to spend less as the base rate increases.
The changes can be made by the Bank of England during meetings held by the Monetary Policy Commitee (MPC), these happen around 8 times per year. Sometimes, they may hold emergency meetings too, like during the financial crisis of 2008. Predicting when the base rate is going to change can be tricky, but they do try to issue guidance on whether they expect it to rise or fall over the coming year.
The base rate also has an effect on interest rates set by Banks and Building Societies for mortgages, loans and savings accounts. If the base rate goes down, interest rates on mortgages and loan probably will too, but so will savings rates. Similarly, if the rate increases, you should expect an increase in lending, the upside being that your savings could start earning a little more too.
So what does this mean for your mortgage?
Well, if you’re currently on a fixed rate, there is no immediate change – you are tied in until a certain date meaning your interest rate and monthly payments will stay the same. However, when your current product comes to an end, you will usually be placed on a variable rate – which is now likely to increase. We would recommend reviewing your mortgage around 4 months before the product is about to finish, that way, you have time to speak to a mortgage adviser, consider your options, get the right advice, and apply for a new product with enough time. If you’re in that timeframe now, complete an enquiry form selecting the option “Remortgage a property” and one of our experienced advisers will be happy to help. You can also call us directly on 01423 611004 Option 2.
If you’re on a variable rate, now is the time to contact us! Your rate may increase, depending on who your current lender is, meaning your monthly repayments will also go up. Your lender should notify you that this change is happening, and what it will mean for your payments. You can benefit from our advice today, by filling an enquiry form selecting “Remortgage a property”. You’ll also receive an email with a link to book a telephone appointment into an adviser’s diary.
We’ll be sure to keep you updated with any other changes in the future, but for now, it’s worth checking your current product to see if there’s anything that can be done and contact us for advice.
Are you a first-time buyer?
Whilst you won’t be able to secure an interest rate or mortgage product if you haven’t found a property, it may be time to start preparing for what’s to come. We know how the market is right now; lot’s of competition from other buyers, waiting lists to view properties and offers going in way above asking price. Have a chat with an adviser to see if they can obtain a Decision in Principle for you. It can put you in a more preferential position when booking viewings with estate agents or speaking to new home builders. Having a Decision in Principle (sometimes referred to as a Mortgage or Agreement in Principle), can make you more attractive than other potential buyers, as they can see you’ve already engaged with a mortgage adviser and know your potential borrowing amount for a mortgage. Contact us today for an initial chat about your options, or learn more about being first time buyer.