Bank of England Announces 14th Consecutive Base Rate Increase

The Bank of England has today (03/08/2023) announced a further rise to its base rate, increasing it to 5.25% as measures to tackle UK inflation continue.

This was the 14th consecutive rates hike from the central bank, although the increase of a quarter of a percentage point marks a less dramatic climb than June’s 0.5% rise.

The base rate has not reached this peak since April 2008, the height of the financial crisis, though there are positive signs that previous rates increases are starting to curb inflation. Last month, UK inflation dropped to 7.9%, its lowest level for more than a year.

This, however, is still almost four times higher than the bank’s inflation target of 2%, which means that further rates rises are not completely off the table, despite economists and market commentators recently downgrading their predictions for the base rate’s peak.

It was previously thought that the base rate could peak at 6% or higher, but the latest forecasts suggest that 5.75% could be the summit before it starts to fall.

What does this mean for mortgages?

Anyone on a tracker or variable rate mortgage will see an immediate increase to their mortgage payments. According to UK Finance, the latest base rate rise means that tracker mortgage holders will be paying an extra £23.71 per month while those on their lender’s standard variable rate will see their monthly mortgage costs increase by £15.14.

Fixed rate mortgage holders won’t see an immediate increase on their payments, but could find that they are paying around £220 more per month when the time comes to remortgage.

Buy-to-let landlords are also facing higher payments, just like residential mortgage borrowers are, and many are expected to pass these costs onto their tenants. Furthermore, the consecutive rates rises are said to be discouraging new landlords from entering the market.

You can calculate how much your mortgage is likely to increase by following the base rate rise by using our mortgage difference calculator below:

What rates are available right now?

The good news is that mortgage lenders have been decreasing their rates slightly of late, following reports that the base rate is likely to peak at 5.75% rather than 6%.

Many mortgage lenders have already priced the latest base rates increase into their product rate, so its impact on new mortgage deals is expected to be minimal.

Take a look at our rates table below to get an idea of the deals currently available:

Please note that the above rates were accurate at the time of writing, but are always subject to change at the lender’s discretion. Speaking to a mortgage broker is the best way to find the most up-to-date deals.

Will anyone benefit from the latest rates rise?

While it sounds like negative news for anyone on a variable rate mortgage, first-time buyers and those who need to remortgage soon, the latest measures from the Bank of England could benefit most of us in the long run if inflation starts to drop at a faster rate.

This will mean that interest rates will begin to drop more sharply over the coming months, but while they remain high, some savings account customers could see the interest rate on their savings increase, though not all banks are passing this on to their customers.