What does the increase in Bank of England base rate mean for your mortgage?
Edward Willday – Sept 26, 2022 – 5 mins
What does the increase in Bank of England base rate mean for your mortgage?
Edward Willday – 26 Sept, 2022 – 5 mins
You may have seen in the news recently that the Bank of England are increasing the interest base rate to 2.25%. This is in a bid to curb the rising level of inflation across the country. But what does the rise in interest rates mean for you and your mortgage? Put simply, the higher the interest rates, the higher your monthly repayments will be. Since December 2021, the Bank of England has increased the rates at each meeting of the Monetary Policy Committee, by a total of 2%, as shown in the table below:
Date |
Base Rate |
September 2022 |
2.5% |
04 August 2022 |
1.75% |
16 June 2022 |
1.25% |
05 May 2022 |
1.00% |
12 March 2022 |
0.75% |
03 February 2022 |
0.50% |
16 December |
0.25% |
Will the rate’s keep increasing?
The Bank of England is very concerned with spiralling inflation, leading to no sign of the rate increase slowing. In fact, predictions show that it may have to rise to 6-7% to control the level of inflation. This base rate hasn’t been seen since 1992 and could see lenders charging over 10% for 5-year fixed rate mortgage deals, should it come to fruition.
If your mortgage deal is due to come to an end within the next 6 months, it is worth beginning the conversation now to review your mortgage – waiting even a few months could result in a huge increase in monthly payment.
Please see the example below for real-world examples:
Example mortgage details:
- Mortgage amount £200,000
- Mortgage taken over 25 years
- Repayment mortgage
- 80% Loan to Value
⇒ Review in September 2022: Fixed interest rate of 3.55% over 5 years – Repayment amount: £1,009 per month
⇒ Review in March 2023: Fixed interest rate of 8.15% over 5 years – Repayment amount: £1,563.56 per month.
As can be seen in these example figures, reviewing your mortgage now rather than in 6 months could potentially save you £33,371 over the five-year term of the deal!
Did you know, even if your mortgage deal is in place for the next six months, you can apply for a mortgage now and your offer will last for six months.
To help with the current cost of living crisis, Willday Wealth Management have reduced their fee from £395 to £195.
We will discuss with you:
- A review of your current mortgage deal and any early exit penalties
- The pros and cons of paying a fee to break the mortgage term
- How this would compare to your current mortgage monthly cost, over the next 5 years
Get in touch with us
If you have any futher questions, please don’t hesitate and contact us.
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