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Bank of England announce 11th rate rise

Following a meeting of the Monetary Policy Committee (MPC), the Bank of England has voted for an 11th consecutive raise to UK interest rates. This is a rise of a quarter of a percentage (0.25%) from the previous rate of 4.0%.

It had been believed inflation would drop but it instead increased 0.3% to 10.4%, leading the BoE to take action to try and relieve the pressure on the UK economy. With interest rates increasing, you may wonder how your new or current mortgage will be impacted by this announcement.

In this blog, we will discuss why the Bank of England is increasing their base rate and how your mortgage and monthly bills could be affected.

In this section (Bank of England announces 11th rate rise):

This is the 11th time that the Bank of England has voted in favour of increasing their interest rate. This is to attempt to tackle the high levels of inflation in the UK currently, with high costs of basics like energy and gas pushing inflation higher than 10%.

As interest rates are so directly linked with inflation, as inflation increases it is inevitable interest rate will follow this pattern as well. Inflation had been expected to decrease from its rate of 10.1% but as it increased instead, it meant the BoE had to act to limit the impact on the UK economy.

How much will interest rates affect my mortgage?

Anyone with a current mortgage could face higher repayments due to the Bank of England base rate hike. This is because generally lenders will adjust their own interest rates in line with any changes the BoE makes.

If you have a tracker rate mortgage, you will be directly affected no matter which lender you are with as your mortgage interest is always based on the BoE rate. Those on variable rate mortgages could see a rise though by how much is uncertain, as lenders can raise rates at their own discretion.

Will new mortgage applications be affected by inflation?

New applications may become slightly more difficult moving forwards, as fluctuating inflation rates could make credit harder for borrowers to access.

If you are considering a new mortgage or remortgage this year, it could be worth speaking to a mortgage expert for help and support. A trained mortgage advisor will be able to help you assess your income, the mortgage type you need and more, to make sure you only apply to the lenders most likely to approve your application.

In some good news for those looking to buy, house prices have been falling recently with a 10% decrease expected by the end of 2023. You could get the property you want at a bargain price, provided you can get the mortgage you need in place.

Find out more about getting new mortgages in our guide to BUYING A HOME.

What should I do if I am struggling with mortgage repayments?

Research suggests that many UK homeowners will struggle to afford their mortgage payments this year, due to raised interest rates and the increasing cost of living crisis. There is a definite risk of many people ending up in mortgage arrears and in extreme cases losing their home completely.

If you think you may end up struggling to pay for your mortgage, there are options available to help support you if needed. This includes:

  • Government support schemes such as Support for Mortgage Interest
  • Speaking to your mortgage lender about a payment holiday (brief break from repayments)
  • Seeing if your lender has other methods of support available
  • Talking to a mortgage specialist for help and guidance

It is a worrying time to be a UK homeowner with constantly increasing bills causing many people financial difficulty. Our specialist mortgage advisors can help you review your mortgage FREE OF CHARGE to ensure you aren’t paying more than you need to be.

We can search mortgage deals from over 50 TOP UK MORTGAGE PROVIDERS to find you a mortgage or remortgage offering the terms you need at the best prices.

Resources

Citizen’s Advice – Deciding if you should apply for SMI

MoneyHelper – Government help if you can’t pay your mortgage

Citizen’ Advice Scotland – Schemes that can help if you can’t pay your mortgage

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