This increase is a typical 0.25% making the Base Rate 0.75% – the highest it has been for over a decade.
But what does this actually mean for everyone?
The first place attention turns to is mortgage payments – the single biggest monthly commitment for most people. This rate rise will not affect many people for maybe several years, as they are in the middle of a fixed rate.
For those on variable or tracker rate mortgages, their payments will increase next month or possibly the month after depending on their lender’s systems and processes.
Anyone whose products are coming up for renewal will find the products they can choose from might be more expensive than last year or the year before. Lenders have been increasing their products for the last two months in preparation for this rate increase, so not much will change in the next week or so but if inflation exceeds expectations then the Bank Of England may be forced to increase the base rate again in May.
If that is the case then we can expect to see mortgage products continue to rise.
Borrowers whose mortgage products are due for renewal in the next six months should contact a professional mortgage broker to look at their options, as they may be able to lock in a current deal before rates increase any further even with six months to go.
Personal loans and credit cards are likely to remain largely unchanged for now, as their margins can take this relatively small increase.
Demand has been strong throughout the pandemic and this is continuing with the lack of supply still fuelling current prices. This rate increase may put a few purchasers off if they are close to their budgets already but given mortgage rates are still historically very low, the cost of borrowing remains very cheap indeed.
With demand being so resilient even after the stamp duty holiday ended, it is expected the housing market will continue as it is but maybe prices will not rise as fast as they have done in the last two years.