Mortgage interest base rate increase: what does it mean to me?

The Bank of England had raised the UK interest rates to 0.75% from 0.5%. The Bank had taken the initiative as a response to the inflationary pressures. With the increase in mortgage base interest rates, everyone must identify what it means to every individual.

Before understanding the impact, it is necessary to know the England base rate.

Mortgage interest base rate increase: what does it mean to me?

What is the Bank of England base rate?

The Bank rate or base rate refers to the interest rate the banks and building societies pay to the Bank of England. It influences the institutions and charges what the borrowers pay, helping them earn savings via interest.

The inflation target of the UK is around 2%. The Bank of England base rate will depend on whether the Monetary Policy Committee thinks the level of spending across the UK is too low or high to meet the inflation target. To stimulate extra spending, the rate will be lower. Therefore, the mortgage rate and interest rate will lower as well. It may lead to additional sending. This will contribute to reducing inflation when the target is over 2%.

The mortgage lenders' charges will also be high when the base rate increases. The higher cost will further be passed on to the customers regarding interest rate. Therefore, it stands for the mortgage rate increase. When the base rate increases, the mortgage rate will also become expensive. Furthermore, the saving account holders will need to pay more interest for the money.

What will the base rate increase mean for common people?

When the base rate increases, the mortgage rate will also increase when the base rate increases, significantly impacting people.

Given below are some of the common ways through which the base rate increase will affect people:

1. Savings

The savings rates will slightly increase if you have savings in your account. However, the best saving deal will further be saved for the long term on fixed rates. On the other hand, there will be moderate hope for the savers.

If the percentage increases, the money will also increase significantly. The individuals who want a rise in base rate will also see an increase in saving rates. However, consumers may need to wait for a bit until they experience a complete savings rate.

The saving rates are not an important part to consider; however, ignoring it all together can have a negative impact in case of emergencies. If you want to reduce the impact of inflation, every penny is of utmost importance. If not taken care of, the consumers will need to use their additional savings to stay financially stable in case of rising prices.

2. Cost of living

The increase in the base rate is done to control inflation. Energy prices have a significant role in inflation which is further decided internationally. The domestic rise will also impact the cost of electricity and gas across households. Therefore, it will have a significant impact on the cost of living.

The rising food and clothing prices also have an impact on inflation. These costs are rising because of the short supply, and the items are continuously shipped because of fewer shipping containers. As a result, the price of moving goods has significantly increased worldwide.

Brexit has significantly impacted inflation, leading to higher import taxes. Businesses that rely on international sourcing are under pressure, and these increased prices are further passed to the consumers.

It is expected soon; the inflation rate will reach 7%. All bill payers must further plan their budget accordingly. Inflation on non-discretionary items like utilities and foods will lead to people struggling to meet finances. Therefore, it can put those individuals into debt.

3. Mortgage

With the increase in the base rate, the mortgage rates would also increase. It will affect the homeowners on the standard variable rate for the lenders, and the new rate will be passed on to the borrowers.

If you have a fixed-rate mortgage, you can protect the changes for a period. If you have a two-year fix, it can last till 2024. It is advisable to know the remortgage rate, especially on the lapse. Therefore, the mortgage payment rate will jump significantly.

You must consider reaching out to the independent broker if you can remortgage. They can help you find the perfect deal at a cheaper rate. The mortgage rates have been at a considerably higher price considering the variable rates. It can bring a wide range of security and payment confirmation.

To understand the base rate increase, it is also essential to know the increase in SVR. Various borrowers are on a fixed rate and are likely to feel the hit of the hike. Nonetheless, first-time buyers may need to struggle a bit to get the best deal.

First-time buyers will need to consider various factors to determine the rate rise. They need to be familiar with the maximum and minimum values. Furthermore, the higher interest rate for loan-to-value borrowing is also essential.

The increase in the base rate is likely to lead to an increase in interest rates. As a result, it can lead to a rise in the cost of living. Therefore, it will become challenging for first-time investors to move up the property ladder.

How high will the interest rate go?

Necessary actions will be taken to bring inflation down to 2%. This is the target the Government sets to determine security. When the interest rate goes up, it will ultimately depend on the country's economic conditions and impact the inflation rate. Although the rates have risen, they won't increase more until the coming times. The Bank of England analyses the economic conditions and changes in interest rates at least eight times a year.


The inflation or base rate change will likely impact the savings rate significantly. Therefore, it is advisable to keep a check on it. It is also advisable to check the monthly spending, primarily to determine the mortgage rate. You may get in touch with your lender to know whether you're on their SVR or not. This will help you understand if the base rate change will affect you on a large scale or not.

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