Back in 2018, the Bank of England (BoE) once again raised its interest rate. This was the second time it had done so in the past ten years. The base rate went from 0.5% to 0.75%, which was the highest it had been since March 2009.
Essentially, the base rate dictates the BoE’s official borrowing rate to banks and lenders. This of course then has a direct influence on what borrowers pay. We wanted to go through exactly how the base rate affects the type of mortgage you have.
Tracker mortgages
A tracker mortgage will usually follow the BoE’s base rate and will therefore likely be affected if it was to rise. If you are currently on this type of mortgage you can expect to see your monthly mortgage repayments to increase should the base rate do so.
Variable rate mortgages
If you’re currently on a variable rate mortgage deal, this will mean that the mortgage lender themselves will be the one who sets the interest rate. However, any rise in the base rate is likely to be passed on by many lenders to their borrowers. It’s always worth contacting your lender to find out if you are likely to see an increase in your mortgage repayments should the base rate rise.
Fixed rate mortgages
When it comes to fixed rate mortgages, which are the most common type of mortgage in the UK, these are likely to be unaffected by an increase in the Bank of England’s interest rate. Unless you happen to be coming to the end of your term. Lenders can raise their fixed rates following an interest rate increase, meaning it’s likely you could end up paying more for your repayments if you are due to renew your deal soon.
What action can you take?
If you happen to be on a fixed rate mortgage and you’re worried about getting switched onto a more expensive deal when your mortgage term ends, you do have options. As long as your end date is not too far in the future, you can seek out the services of an experienced mortgage broker, who can ensure you find the right deal for you.
Also, if you happen to be on a tracker or variable rate mortgage deal, and you’ve noticed that your rate has increased, you can speak to us at TaylorMade. We’ll talk you through and assess all the options available to you. For more information get in touch with us today on 0345 305 2540, or at info@taylormade-finance.co.uk.
