UK interest rates rise to 4.5%
There have been continuous increases to UK interest rates over the last year. This week the Bank of England has announced a 12th consecutive increase of 0.25%. Following on from the last rate rise in March, the UK now has a base interest rate of 4.5%.
The last time this country was faced with such high interest rates was following the mortgage market crisis of 2008 and the global financial crash.
Mortgage holders are now understandably worried, with many questioning how their monthly repayments and finances will be affected. With UK inflation staying firmly in double figures (10.1%), it is unlikely high interest rates will drop any time soon.
More about interest rates – Mortgage interest rate predictions UK 2023
What was announced following the Monetary Policy Committee meeting 2023?
As of 11th May 2023, the UK has the highest interest rates in the G7 (4.5% interest). This follows a vote by the Monetary Policy Committee to increase the Bank of England’s base interest rate by 0.25 percentage points.
This is due to the consistently high rate of inflation in the UK over the last year. The job of the Monetary Policy Committee is to oversee the UK economy and make changes to improve its stability. The key way to bring inflation back to a manageable level is to increase interest rates.
High interest rates should lower demand for products and services, which should in turn lower inflation. The Monetary Policy Committee (MPC) meets around every 6 weeks (8 times per year) to vote on any potential changes. The next scheduled MPC meeting is in July 2023.
What will happen next with interest rates?
It is hard to say for certain, but economists are hopeful that inflation will be brought under control by the end of 2023. If this is the case, the Bank of England should also be able to reduce interest rates.
With inflation and interest being so directly linked, one cannot be lowered while the other is at a high rate. The ideal rate for inflation in a stable economy is 2% and currently the UK sits more than 8 points higher than this. Without a significant decrease in inflation, UK residents will be left with high interest for the foreseeable future.
How will mortgage interest rates be affected?
High interest will have a big impact on a range of financial products, mortgages included. Anyone with a mortgage will have to pay interest, though the amount paid will be different depending on the mortgage type.
- Fixed rate mortgage holders shouldn’t need to worry about raised interest rates unless they are coming to the end of their special rate period. If you still have several years of fixed interest left, it is possible rates will be far lower by the time you are switched to your lender’s standard variable rate (SVR).
- Tracker rate mortgage holders should brace for higher repayments, as their interest rate is tied to the Bank of England rate. Any change to the BoE base rate will have a direct impact on your monthly payments.
- Variable rate mortgage holders may see an increase in monthly mortgage payments – but this will depend on their lender. Lenders can adjust their variable rate at their own discretion, but commonly will increase or decrease based on the BoE base rate.
With interest rates climbing and the UK in a cost of living crisis, you may be worried about repaying your mortgage this year. A good option would be to consider a remortgage to a fixed rate, before rates increase any further. This would allow you to rest easily with long term security, knowing you will not be surprised by any more sudden interest rate hikes.
For qualified mortgage advice, our skilled specialist brokers are here to help. We have helped thousands of people find the right mortgage deal and can offer you a FREE mortgage review. With access to rates across more than 50 TOP UK LENDERS, we can help you save by switching your mortgage over quickly and hassle free.
Recent mortgage news
Here, we have some more news affecting mortgages and the housing market in 2023:
- Interest rates to fall says IMF
- House sales drop nearly 40% since 2021
- UK mortgage repayments rise nearly 60%
- Decrease in interest rates
- BoE announce 11th interest rate rise