On the 16th of June this year, the Monetary Policy Committee (MPC) raised the base rate an additional 0.25% to 1.25%. But what does that mean? And what is the effect on your mortgage?
Over the last decade we’ve seen historically low interest rates, in fact in 2016, the base rate was at just 0.25% meaning that borrowing at this time and fixing your mortgage rate for a long period could have saved you thousands. This interest rate has been stable for many years and has encouraged widespread spending.
Why is the base rate increasing?
The base rate increase is a response to rising inflation. The Consumer Price Index (a measure of the cost of goods and services) hit 7% in March, which is well beyond the Bank of England target of 2% and the highest in three decades. By increasing the cost of borrowing, the Bank of England hope to reduce rising inflation, amid the cost-of-living crisis.
In March, due to fears over inflation, the MPC decided to increase the base rate to 0.75%, a 0.25%-point increase. A relatively modest increase, however, significant nonetheless, considering the rate was reduced to just 0.1% during the coronavirus epidemic.
What does this mean for me and my mortgage?
It might be worth speaking with your us sooner rather than later as we may be able to help you find a more suitable deal before you incur the higher costs associated with rising rates.
Your home or property may be repossessed if you do not keep up repayments on your mortgage. You may be charged a fee for mortgage advice.
How can we help?
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