Bank of England Base Rate Hike: Mortgage Experts React

The Bank of England has once again upped its base rate, this time to 1.25% to tame the soaring inflation that continues to dominate UK headlines. But what does this mean for mortgages, and should you hang fire if you’re planning to apply for one in the near future?

We’ve put these questions to the mortgage experts and the general consensus is that professional advice is more important than ever amid market uncertainty.

First and foremost, whenever the central bank alters its base rate, this usually means that the interest rates for mortgages and other financial products see similar changes. If the cost of borrowing money rises, mortgage lenders often recoup this cost by raising their rates.

“Typically whenever the base rate increases, mortgage rates tend to follow suit shortly after,” explains Chris Kenny, a Mortgage and Protection Advisor with Finance Advice Centre.

“This means that monthly repayments will likely be higher and/or the amount of the monthly mortgage payment that goes towards the interest will be higher – and therefore their mortgage will get paid down slower in kind.”

Chris’s advice to anyone thinking of buying a property or remortgaging is to act quickly, as the current market conditions suggest that mortgage rates could soon be on the rise.

“Personally I’d say that rates are only going one way so if you’re thinking of buying or remortgaging, do it sooner rather than later. That being said I must insert the caveat that I cannot predict the future so there’s no telling what will happen to rates going forward.”

The good news is that favourable mortgage deals don’t suddenly vanish from the market in the wake of a base rate increase. Granted, those on tracker mortgages will feel the pinch right away, but there’s often a window of opportunity before lenders revise their full product range.

Moreover, some lenders may choose not to alter their standard variable rate in response to the latest base rate adjustment. In the wake of the bank’s June announcement, Leeds Building Society confirmed that its standard variable rate will be holding firm.

Nathan Porter, a specialist mortgage advisor, believes that seeking expert advice is of paramount importance right now and has urged anyone on a fixed-rate mortgage with six months or less remaining on the introductory period to speak to a broker immediately.

“It’s more important than ever to speak to a mortgage broker, who can search the market to find your best deal,” he said. “There’s an element of uncertainty at the moment, having a dependable broker helping you navigate the changing mortgage landscape is vital.

“For remortgage customers, if you’re within six months of your current deal ending, speak to a mortgage broker who can search the market to lock in your next deal.”

Pete Mugleston, Online Mortgage Advisor’s managing director, added: “Although interest rates are on the rise and times are still uncertain, mortgage and remortgage customers aren’t out of options just yet. Fixed-rate deals with low interest rates haven’t completely died out and there are mortgage brokers out there who specialise in protecting borrowers against rates hikes.

“I would advise anyone who is concerned about the latest rates increase to talk to a broker immediately. They offer free, no-obligation chats, so why not find out what your options are?”

You can find out more about how the Bank of England’s base rate affects mortgages in our standalone guide on this topic.