What the Bank of England’s increase base rate to 3% means for your mortgage

Posted: 07 December 2022

The Bank of England has announced an interest rate rise of 0.75%, to 3% – a level not seen since 2008, as the UK battles with soaring inflation.

I have a mortgage. What happens now?

The vast majority of mortgage holders in the UK are on a fixed-rate mortgage. Therefore, for most, nothing will change. However, any new deal you remortgage to in the future may be more expensive.

If you’re on a standard variable rate (SVR), tracker or variable mortgage, your payments will rise almost immediately in response to the latest base rate hike. These products move in line with the Bank of England, so when it rises, your payments rise, and when it falls, your bills fall, too. After a base rate change, your lender will write to you and let you know how you will be affected. Your mortgage contract should explain how quickly these changes should take effect.

So, should I remortgage now?

If you’re close to the end of your current term, you may want to search for a new mortgage deal now. Many lenders issue offers that are usually valid for six months.

If you will be looking to get a mortgage in the coming months, get your documents in order in good time. ID being up to date and your address being correct on your bank statements will help avoid delays on your mortgage application. It is also worth checking your credit report for any errors.

Remortgaging with the same lender can save some time and often doesn’t come with fees, but you can’t be sure you’re getting the best interest rate on the market – so shop around.

To summarise, our top tips are…

1. Act fast: the best rates are disappearing due to such high demand, so you’ll need to be quick
2. Fees and charges: watch out for any early-repayment charges or exit penalties if you are considering switching before your current term has come to an end. Look out for other fees such as arrangement fees, valuation charges and legal costs. It may be cheaper in the long run, but make sure you crunch the numbers
3. Shop around: though it may seem easier to stay with your current lender, this may not be the best option in the long run financially

If you would like further information on our conveyancing services we offer, please call 01245 493959, email or complete our online form