August Interest Rate Decision
Today, the Bank of England announced the bank rate would be increasing to 0.75 per cent, which could have an impact on those who are on SVR mortgages.
Brian Murphy, our Head of Lending here at Mortgage Advice Bureau comments on today's decision:
“As the decision to raise the Bank of England base rate today demonstrates, it would seem that current economic indicators have provided members of the Monetary Policy Committee sufficient evidence to reduce monetary easing to the UK economy.
The increase in the bank base rate seen this afternoon will have little impact on many new borrowers who’ve probably opted for a fixed rate product, which has been the case for the majority of those taking out new mortgages for quite some time with as many as nine out of ten borrowers in recent years opting for a fixed rate product.
However existing borrowers whose mortgages are directly linked to the bank base rate will see a minor increase in monthly repayments as the movement upwards today opens up the possibility for some households to see an increase in their monthly expenditure over the next few weeks. Those who are on lender revert rates or SVRs will have to wait and see if their lender will pass on the rate increase in full or only in part, whereas those who have a tracker rate are more likely to see the rate passed on in full and possibly as soon as their next mortgage payment. Either way, for those with a tracker mortgage linked directly to the BOE base rate, for every £50,000 of borrowing on a 20 year term mortgage, the interest rate change today would increase their payments by £6 per month*
Today’s rise may be the start of a slow and gradual rise in interest rates to more ‘normal’ levels and those who’ve been sat on their lenders’ Standard Variable Rate may benefit from considering a remortgage. The sooner consumers act, the more likely they will be to secure a rate close to the lowest ever levels. For most people a remortgage is a fairly straightforward process and certainly not something to be scared of. Likewise, for those nearing the end of their current fixed rate mortgage deal or who are considering new borrowing, it may pay to contact their broker or lender to start the process sooner rather than later in order to secure a competitive deal.”
*Indicative figure, calculations based on £50,000 borrowed over a 20 year term, with mortgage interest rates changing from 2% to 2.25%.
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