It’s been over 10 years since the Bank of England last raised its Bank Rate. On November 2nd this year, the rate was doubled, although this isn’t quite as scary as it sounds as it went from a lowly 0.25% to 0.5pc - a far cry from the 15% rate we saw in 1989/1990.
This was a widely predicted increase to help boost the UK economy and combat rising inflation and it will, of course, have an immediate effect on many UK consumers, whether it be through their mortgage payments increasing, their credit card rates or the cost of personal loans.
We spoke recently of the different types of mortgage that exist, so you'll know already that, if you’re on a fixed rate mortgage, your payments are not going to change until the end of your fixed rate term. You’re alright, Jack!
On the other hand, if you have a variable rate mortgage, your mortgage repayments are likely to rise in conjunction with the bank rate.
However, this is neither an automatic nor an immediate fact of life. Banks will alter their Standard Variable Rate (SVR) as and when they choose, but it goes without saying that any increase in the Bank Rate will hit the borrower’s pocket sooner rather than later.
An increase of 0.25% on a £100,000 repayment mortgage, for example, will cost an extra £13 a month roughly.
Nationwide, Barclays and TSB are due to raise their SVR on December 1st, while Santander is currently reviewing the situation as is HSBC. Yorkshire Building Society will raise its SVRs on December 10th and Clydesdale / Yorkshire Bank increased its SVR with immediate effect.
Bank of England Governor Mark Carney had alluded to this potential rise in the Bank Rate, the first since July 2007 when it increased from 5.50% to 5.75%. It is expected that any further increases will be slow and moderate, so no need for borrowers to panic.
However, the majority of borrowers - 57%, according to data supplied by lenders - are already on fixed rates, are as a whopping 88% of new mortgages.
If your own fixed-rate deal is drawing to a close, this may be a good time to do your research on another fixed-rate deal with a different lender. Cailean Mortgages would be happy to do this for you and, as an independent broker, will always find the right deal for you, tailored to your requirements.