The Bank of England has just upped the base rate from 0.5% to 0.75%, but the impact for homeowners and mortgage holders should be minimal.
As many experts had predicted, today saw the Bank of England announce that it would be raising its base rate to 0.75%, marking just the third base rate change in almost a decade – and only the second time it has been increased during that time. The incremental rise of 0.25% follows on from the same increase back in November 2017 from 0.25% to 0.5%, in response to the UK’s strengthening inflation rates.
After many years of historically low interest rates, some worry that the rise could see borrowing rates creep up, which would affect millions of homeowners with mortgages, or those looking to obtain them, although it could be good news for savers if banks put savings rates up in line with the base rate shift.
Many borrowers are protected
However, with the rise already predicted by most experts and financial insiders for many months, mortgage providers, lenders and banks had already begun to make small adjustments to their product offerings and deals, and the majority of homeowners are currently on fixed rate mortgages.
As such, David Westgate, group chief executive at Andrews Property Group, says the base rate rise is “unlikely to cause any shock waves in the property market”.
“In recent times, many people have opted for fixed rate mortgages to take advantage of these historically low rates,” said Westgate.
“Mortgages on floating rates, meanwhile, that would be subject to adjustment after today’s announcement, are currently at a record low. Many borrowers are, therefore, protected against any resultant uplift in mortgage costs.”
Property is a medium to long-term investment
He added: “In terms of property values, irrespective of today’s news, we are already seeing a natural adjustment in pricing across many of our operating areas and this is quite simply because property costs are related to affordability. Confidence continues to underpin the property market and consumers should, therefore, still view a property purchase as a medium to long term investment.”
For those who are on variable rate mortgages – particularly trackers which match any rises in the base rate – borrowers could see a slight increase in their monthly payments. However, lenders are continuing to compete for customers by offering good rates and a range of incentives for those wishing to switch to a fixed rate deal, and there are even 10-year fixed rates available for those who want to cushion themselves from any future rate rises.