The Bank of England is expected to raise interest rates this week
Any move to raise rates again would mark the central bank’s first consecutive increase since June 2004, after raising rates from 0.1% to 0.25% in December 2021. Below is everything you need to know. need to know in terms of your mortgage and your savings, but remember we won’t know for sure what the Bank of England decides until Thursday (February 3).
I have a mortgage. What could happen now if rates go up?
According to UK Finance, 74% of all current mortgages are fixed, which means that for the vast majority of mortgage holders, nothing will change. The key points for mortgage holders are:
- Patches are fixed – but re-lock them now if yours is ending soon. As the name suggests, rates WILL NOT CHANGE during the fixed period – although any new solution you remortgage in the future may end up being more expensive, you may want to check if you can correct now if your offer current approaching expiry.
- Lenders MAY increase standard variable rate (SVR) or “discount” mortgages. These move at the discretion of the lenders. We will check with major lenders what they plan to do if the base rate goes up. You will usually be on an SVR after your patch or tracking is complete. A “discount” mortgage, on the other hand, follows the SVR at a fixed rate, for example, if the SVR is 4% and the rate is SVR minus one percentage point, it is 3%.
- On a tracker mortgage? The prices will go up. As the name suggests, these “track” the base rate, so mortgage costs will increase if the base rate goes up, so check now if you can upgrade to a better deal.
What should I do?
- If you are on a fixed rate that ends in the next three to six months, you can start talking to a mortgage broker now to see if you can remortgage on a better deal, as you are able to lock in deals available now for the next few months.
- If you are on a standard variable rate (SVR) or “discount” mortgage, your mortgage will likely increase by 0.25 percentage points if the base rate increases on Thursday. If you are on a trailing mortgage, your rate will almost certainly increase by the same amount as the base rate, for example, 0.25 percentage points. SVRs are expensive, however, and tracker mortgage rates could rise, so if you have one, consider securing them now in case rates rise further.
If you are looking for a new offer, consult our Mortgage Guide or First-time buyer’s guide to getting help, plus our Best mortgage deals comparison tool for the best deals. The table below lists some of the top mortgage brokers that can help you save time when looking to remortgage.