The Bank of England base rate rose from 0.75% to 1% on 5th May 2022. This is the first time since February 2009 that the base rate has been at 1%, when it headed downwards following the financial crisis in 2008. That means that many homebuyers or homemovers may not understand how this change may affect them; so we’re here to help.
The change only affects homebuyers that have a mortgage. Those homeowners who have fixed rate mortgage deals won’t be affected immediately, as a fixed rate mortgage product is fixed at a set rate for a set term; however, once that term is at an end, it’s likely that re-mortgaging in future will be at a higher rate, making repayments more expensive.
Those with variable rate mortgages are likely to see monthly costs rise imminently. A snippet from thisismoney.co.uk:
According to financial information service Moneyfacts, the average SVR has increased from 4.41 per cent in November 2021, when the base rate was still at 0.1 per cent, to 4.78 per cent today.
In real terms, that would mean that someone with a typical £150,000 standard variable rate mortgage is paying £30 more per month than they were in November.
Someone taking out that mortgage today would pay almost £10,000 more over a 25-year term that someone taking out the same mortgage last November.
Switching from a standard variable revert rate to a fixed rate could significantly reduce someone’s mortgage repayment. According to Moneyfacts, switching from a 4.78 per cent standard variable rate to a 3.03 per cent two-year fix would save approximately £4,611 over two years, for someone with a £200,000 mortgage on a 25-year term.
How helpful would it be to know how your mortgage repayments will change? Whether you’re moving or simply re-mortgaging, we have access to independent mortgage advisers that can give you advice when you need it. Contact us on 01243 551368 .