Bank of England Interest Rate Rise – 0.75%
02 August 2018
By Andi Michael
As expected, today the Bank of England have increased interest rates to 0.75%, up from 0.5%. This is only the second raise in the last 10 years, as the government attempted to recover from the recession of 2007.
What effect will this have on new home buyers or those already paying off mortgages?
With 49% of mortgage borrowers in the UK on fixed rate mortgages, the increase in interest rates should not have an immediate effect, but for those on standard variable rate (SVR) or tracker mortgages (around 3.5 million according to the BBC), they will end up paying more.
If you are on a variable or tracker mortgage, it is worth checking what your mortgage lender has to say about their rates and when the change will come into effect. When the last interest rate rise happened in November, changes happened over the following 30 days.
If you are on an SVR mortgage, and you are concerned about future fluctuations, it may be time to have a look at the best deals available on a fixed rate, and to do so quickly.
L and C mortgages say that a homeowner on a £200,000 repayment mortgage with tracking at 1.5% above base rate would see monthly payment increase by around £25 per month. The BBC suggests on a £150,000 mortgage, the annual cost would increase by £224.
What about savers?
Whilst interest rate increases can be bad news for those repaying a mortgage, it can be an advantage for those who want to make more from their savings. However, after the last interest rate rise in November 2017, many banks were slow to apply the extra interest savings accounts.
This is something that Mark Carney, Governor of the Bank of England, noted at the time as being important to savers. We shall see whether the banks are quicker to apply changes to interest rates on savings accounts in the next few weeks.
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