The Bank of England has officially announced that the Base Rate is now set at 1.25%.
This most recent increase marks the 5th time the Base Rate has been increased since December 2021 when the rate was set at 0.1%.
The main driver behind this decision is to help reverse increasing inflation which is currently at 7.8%. As the graph below shows, inflation is currently at it’s highest in 30 years.
Will there be more increases?
It is quite possible that the base rate will be increased again before the end of the year. The Monetary Policy Committee (MPC) who are responsible for rate increases have four more dates pencilled in their diaries to discuss further increases.
- 4th August 2022
- 15th September 2022
- 3rd November 2022
- 15th December 2022
Each time the committee have met for these discussions since December 2021 they have voted to increase the rate.
Prospect Tree Mortgages have been trying to gauge the opinions of UK lenders on whether they anticipate further rate increases. One lender in particular is eyeing a base rate of 3% by the end of 2022.
If the decision is made to increase the Base Rate by 0.25% in each of the meetings they have booked in, then it would leave us with a base rate of 2.25% by the end of the year.
How does this affect me?
How this move affects you will largely depend on whether you are borrowing or saving. For borrowers, you should expect to now have your monthly payments increased as lenders interest rates are adjusted to accommodate the new rate. Savers may see a higher rate of interest being paid to them, although it’s important to remember that banks have to pay out less interest to their savers than they charge their borrowers to stay viable.
My fixed rate ends soon…
If this is you then the time to act is now. If you don’t you may find that you end up paying more than you need to on your next mortgage.
Lenders will gradually start increasing the interest rates immediately – so get in touch with us today to have the best chance of securing a better rate.
If you’d like to learn more about mortgage products and how we can help you, please don’t hesitate to get in touch with our team. We’re here to help you navigate the ever-evolving world of mortgages and guide you toward a brighter, greener home.
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