The Bank of England has announced it has raised interest rates yet again with the base rate now at 4 percent. The decision was revealed today (February 2) after members of the Monetary Policy Committee met to decide what interest rates should be set at, an event which happens eight times a year.
Today's decision means that it is now the tenth consecutive time that the Bank of England has increased interest rates, with the base rate at just 0.1% just over a year ago. The last announcement back in December 2022 saw the Bank decide to raise the base level to 3.5 per cent, but this has now hiked again by 0.5 percent to 4 percent - which is now a record 14-year high.
After a majority 7-2 vote, the Bank decided to increase interest rates 'to make sure inflation falls and stays low' as they aim to lower inflation to 2 percent - a target set by the government - but the 4 percent base level is likely to cause concern amongst millions of people in the UK.
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The Bank's interest rates have a direct affect on other rates all across the UK and can affect loans, savings accounts and mortgages.
How the bank rate will affect you depends on if you are borrowing or saving money, and it is those with a mortgage who may be worst hit by the higher rate. Mortgage repayments are likely to rise alongside interest rates for those with a variable rate mortgage.
Homeowners on this type of mortgage may notice their monthly payments going up, and you can use a mortgage calculator to find out how much of an increase this may be. However, for those on a fixed rate, the good news is you won't see any changes to your repayments until your fixed term comes to an end.
Rightmove’s property expert Tim Bannister said: “Today’s 0.5% rise in the Bank of England base rate is another cost that homeowners on a tracker mortgage will need to factor into their monthly budgets when the full rate rise is passed on.
"It’s likely that many of those on a tracker mortgage will still be on a lower rate than most current fixed-deals even with this increase, so we’re unlikely to see any rush to fix from this group just yet, although with the gap between tracker and fixed rates narrowing it may prompt more people to see what’s on offer in the coming weeks.
“For those considering taking out a fixed mortgage deal soon, the good news is that this increase was widely expected by the financial markets and will have likely been factored into their plans. This means that we may see fixed-rate mortgage deals continue to edge downwards in the first half of this year, as some stability and calm continues to return to the markets.
“We’re still seeing buyer demand higher than the last normal housing market of 2019, indicating that people have the confidence to get on with their moves and if fixed deals do head further downwards this may encourage people further. We may see further increases in the base rate later this year but it’s difficult to predict how it will impact mortgage rates.”
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