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How the Bank of England Base Rate Affects Mortgage Applications

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Pete Mugleston

Author: Pete Mugleston - Mortgage Advisor, MD

Updated: May 5, 2022

The Bank of England’s base rate is something you should be aware of if you’re applying for a mortgage, or any other type of finance, for that matter.

But what exactly is the base rate, what is it currently set at, and how could it affect your mortgage application? You’ll find the answers to these questions and more in this guide.

What is the Bank of England base rate and how does it affect mortgages?

The Bank of England base rate is an interest rate set by the UK’s central bank. It determines the rate that banks and lenders will pay when they borrow from the Bank of England.

It can have a significant impact on mortgages as the interest rate borrowers pay on them usually moves up or down when the central bank changes its base rate. The same applies to other financial products, including savings accounts, loans and ISAs.

Certain types of mortgage are affected more than others. Some tracker mortgages, for example, are tied directly to the base rate and will move up or down in line with it. They can be great at times of low interest, but risky under volatile market conditions.

Lenders will typically increase their standard variable rate (SVR), and indeed, the rates across their product range when the Bank of England ups its rate, but this isn’t always bad news for existing borrowers. This is because many mortgage agreements have an introductory rates period that’s unaffected by base rate changes, such as fixed-rate mortgages.

If you’re applying for a mortgage, it’s a good idea to look up a forecast for the base rate or speak to an expert to see whether it’s likely to move up or down during the process.

What to do if you’re concerned about the base rate

If you’re worried about being hit by a sudden interest rate hike or missing out on the best mortgage deal because the Bank of England might change the status quo, speak to a broker.

The right mortgage broker can help you safeguard yourself against an incoming rates spike by getting your application over the line before it comes in. By assisting you with the paperwork and making sure you’re matched with the right lender first time, your broker can shave time off the application process and get you approved ahead of an expected rise.

A mortgage advisor can also recommend mortgage products that will protect you against future rate rises, including fixed-rate mortgages with length introductory periods.

Even if the Bank of England’s base rate is at rock bottom, it’s still worth speaking to a mortgage broker as they can help you take advantage of the low rates by recommending products that are directly tied to them, such as tracker mortgage agreements.

Should you avoid remortgaging if the rate is high?

Not necessarily. For starters, delaying your plans could mean you’re running the risk of ending up on your lender’s standard variable rate, which is nearly always higher than the introductory rates periods of fixed and discounted mortgage loans.

Moreover, a high base rate doesn’t necessarily mean you’ll get a bad deal on your remortgage. Even though the cost of borrowing has increased for lenders, not all of the most favourable remortgage products will be instantly pulled from the market.

If your creditworthiness is strong – i.e. you have plenty of equity, a clean credit report and steady income – and you use a broker, there’s no reason why you can’t still get a good deal.

What is it currently set at?

At the time of writing (May 2022), the Bank of England’s base rate is 1%, which is relatively low, despite being the highest it’s been since 2009. It was increased by 0.25% this month in a move that was widely expected, due to factors such as rising inflation and the high cost of living.

With the rate at its current level, the cost of borrowing for mortgage lenders is not considered particularly high, but while inflation continues to increase, further base rate hikes are likely.

Is the rate likely to change in the future?

Yes. The Bank of England has already revealed plans to increase its base rate in the near future. Exactly when it will again rise is unclear, but it is likely to be soon, since the central bank has confirmed that its intention is for the rate to reach 1.5% by mid-2023.

The base rate is set by the bank’s Monetary Policy Committee and they meet every six weeks to discuss whether it will rise, fall or remain the same. Their voting history is freely accessible on the Bank of England’s website, so you can keep track of it to see whether there is an upward trend of members calling for a shift in either direction.

Anyone who’s planning to make a new mortgage application, or coming to the end of an introductory rates period, is advised to act quickly if they want to take advantage of the current market conditions. They are likely to change in the coming months.

Speak to a mortgage interest rates expert

If you’re concerned about how the Bank of England’s base right might impact your mortgage plans, keep in mind that help is available. We work with mortgage brokers who know exactly how to safeguard borrowers against rate hikes and help them capitalise when rates are low.

Through our free broker-matching service, we can pair you with the mortgage advisor who is best placed to help you land the lowest interest rate available, whether that’s by helping you get approved quickly while the base rate is low or secure a fixed-rate deal that fits your requirements and protects you against any future interest rates shifts.

Call us on 0808 189 2301 or make an enquiry online and we’ll set up a free, no-obligation chat between you and your ideal mortgage broker today.


Can the Bank of England’s base rate be negative?

Technically, yes, but at the time of writing the Bank of England has revealed plans to increase the base rate, so this is unlikely for the foreseeable future.

That said, the bank did consider dropping the rate below 0.1% during the peak of the coronavirus crisis. This would have meant that lenders would have to make interest payments to borrowers, rather than the other way around.

Such a move would not, however, have seen the introduction of negative fixed-rate mortgages but those on tracker and discount deals would have enjoyed a rate reduction.

When is the next Bank of England base rates meeting?

The next one is scheduled for 16th May 2022. You can find out when the next ones after that will take place by checking the Bank of England’s website.

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We know everyone's circumstances are different, that's why we work with mortgage brokers who are experts in all different mortgage subjects.

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About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!

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Pete Mugleston

Mortgage Advisor, MD

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FCA disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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