The base rate has increased to 4.25%

The base rate has increased to 4.25%

The Monetary Policy Committee (MPC) has voted to increase the Bank of England base rate to 4.25%. This is a 0.25% increase from the previous 4% and is the 11th increase in 18 months. The 7-2 split vote decision was made after the inflation rate unexpectedly jumped again in February to 10.4%. With the UK’s already weakened economy and the current international banking crisis, the measure is hoped to counteract the rising inflation rate.

For those already under pressure with their mortgage repayments, this isn’t the news that was hoped for. Inflation had seemed to be getting under control. It was hoped the rate would remain the same rather than increase as the cost of living is already so high. The MPC’s decision means the current base rate is now more than double the Bank of England’s normal target rate of 2%.

What does the base rate increase mean for your mortgage?

If you’re on a fixed rate, your payments won’t be affected until the end of your fixed term. When that happens, you’ll likely have to pay more than you are now. This is because rates are much higher than they would have been when you took out your fixed-rate deal. If your fixed-rate term is within 6 months of ending, we recommend that you get in touch with our mortgage brokers to start looking for a new fixed-rate deal. Our brokers can secure a new deal for you 6 months in advance. This will allow you to benefit from the current rates rather than risking paying a higher rate in 6 months’ time. Fixed-rate deals have been getting steadily better in the last 6 months. It’s uncertain what effect the new increase will have on the fixed rates offered by lenders.

This rate increase puts a further squeeze on your finances if you have a tracker or other variable rate mortgage. With a tracker mortgage, your rate will go up immediately in line with the new base rate. With another type of variable rate mortgage, your rate will increase but by how much and when will depend on your lender. We recommend speaking to one of our mortgage brokers to compare the deals available with the one you have now. You may prefer to switch to a fixed-rate deal. This will give you peace of mind that the amount you pay each month remains the same.

Look at your mortgage choices sooner rather than later

Give us a call on 01322 907 000 to find out what your mortgage options are. Our brokers will check the details of your current mortgage deal and discuss your circumstances with you. They’ll then search the entire market for competitive deals with flexible terms that suit your needs. They will advise you of any early repayment charges that may be due as well as the fees payable for switching to a new mortgage deal. That way, you can make the best financial decision when it comes to your mortgage.

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