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Bank of England base rates

23/03/22

Base rate rise: How will you be affected?

The Bank of England has announced another increase to its base rate from 0.5% to 0.75%. This will inevitably have an affect on everyone in the country. With further increases potentially set to occur in the next couple of years – how could this change affect your mortgage, your finances and your day-to-day life.

The first point to make is that any new and non-fixed rate mortgages will rise again after the increase as the Bank of England attempts to combat inflation with another increase of 0.25% to the base rate. With the cost of living also on the rise with energy prices having spiked in recent months and further rises coming in April, it may seem like your finances are becoming somewhat harder to stretch. It is important to note that this is a relatively small increase as things stand, but with this being the third increase this year with more potentially on the horizon, it may be advisable to take advantage of the base rate being below 1% sooner rather than later. If you were considering a potential remortgage in 2022, it may be worth doing so as soon as possible. Perhaps you’re thinking of adding some value to your property before summer hits and you could do with freeing up some extra cash? Well, doing so before a further rise by remortgaging could potentially save you a significant amount of money. The Office for Budget Responsibility has predicted that the base rate could go as high as 3.5% by 2023 so a rate of 0.75% is still comparably small, but given the base rate was 0.1% at the turn of the year, there is certainly a noticeable difference. The mortgage market has been in the fortunate position of enjoying record low rates for the last few years. If you are concerned about an increase to your monthly payments, perhaps switching to a fixed rate mortgage as soon as possible would be a good way to keep expenses to a minimum. Locking in your repayment rate before the base rate jumps to 1% could be a good solution if you are looking to remortgage. The good news is that if you are included in the 74% of UK homeowners that are currently on a fixed rate deal, your monthly payments won’t change until your deal comes to an end, so you have time to plan your next steps. The base rate increase could also see every day items become slightly cheaper as inflation slows – so you can hope to save a few pennies on the weekly shop! If you have any concerns or wish to discuss your options moving forward, our advisers are on hand to answer any questions you may have, so don’t hesitate if you’d like to get in touch.

If you’d like to discuss the options available to you, contact your mortgage adviser today

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