In March 2023, the Bank of England announced a 0.25% increase to its base rate, from 4% to 4.5%. In this article, our team of Yeovil mortgage advisors will outline what this means and how it could affect existing mortgages, those applying for a remortgage, or first-time home buyers.
- What Is The Bank Of England Fixed Rate?
- Why Does The Base Rate Change?
- Will The Base Rate Change Affect Your Mortgage?
- How The Levels Financial Can Help
- Just A Heads Up
What Is The Bank Of England Fixed Rate?
The Bank of England charges other banks and lenders when they borrow money. As of March 2023, this fixed base rate has increased by 0.25%, meaning that banks and lenders are now having to pay more for any loans that they are then distributing out to their customers.
The latest base rate increase could have an impact on how much banks and lenders charge for mortgages, loans and other types of credit they offer. Most lenders’ rates will fall or rise with the changes that the Bank of England makes to their base rate.
It is worth noting that just because the base rate has increased, not all lenders will pass the additional charge onto their clients and may not raise their rates in line with the change.
Why Does The Base Rate Change?
The Bank of England will change the base rate as a reflection of the financial status of the country. By changing the base rate, the Bank of England will be able to ensure that the costs of everyday items (food, electricity, gas and transport) don’t rise or fall too rapidly. As the UK’s central bank, the Bank of England’s base rate can influence other interest rates across the UK.
The Bank Of England regularly reviews the financial performance of the country and reacts accordingly by adjusting the base rate. Find out more about past changes in our blog post, ‘What does the August 2022 Bank of England base rate rise mean for you?’
Will The Base Rate Change Affect Your Mortgage?
The new change of base rate could affect the interest that banks and lenders could charge for mortgages. However, at The Levels Financial, our team of mortgage advisors have seen some lenders reduce their fixed rates.
Fixed-Rate Mortgage
The latest base-rate increase will not affect your mortgage payments at this time. Having a fixed-rate mortgage means that any market fluctuations (both high and low) will not affect your monthly payments. However, when it comes to remortgaging, or when your fixed term ends, the new base rate may come into play.
Find out more about fixed-rate mortgages and their benefits and differences in our blog post, ‘Fixed mortgages Vs discount variable mortgages: what’s right for you?’
Tracker Mortgage
Tracker mortgages are directly linked and affected by any changes in the financial market. A tracker mortgage will follow the Bank Of England’s base rate, often with an additional margin on top of that. These transparent mortgages will be affected by last month’s change and your payments in April 2023 will be higher than your March 2023 payments.
Offset Mortgage
Offset mortgages are used in conjunction with a savings account. Lenders will ‘deduct’ your total savings amount from your mortgage repayments and you will only pay interest on the amount left. For example, if you had a £100,000 mortgage loan, but had £30,000 in a linked saving account. Your offset mortgage agreement would mean that you would only pay an interest rate on £70,000 of your mortgage loan.
As the interest you pay is in direct correlation with the Bank of England base rate, your payments may change. However, the more you save with your mortgage provider, the more of your mortgage you will offset, reducing the impact the base rate change will have on you.
Standard Variable Rate Mortgage
As the name suggests, standard variable rate mortgages can regularly change to reflect the current financial status of the country and base rate adjustments from the Bank of England. If you’re worried about the impact the new base rate changes could have on your mortgage and planning on remortgaging, there are ‘four things you need to know when remortgaging in Yeovil’.
Buy-To-Let Mortgages
At The Levels Financial, we work hard to help all of our clients find the mortgage which suits them. A buy-to-let mortgage is no different. Buy to let mortgages can vary depending on personal preferences and what is available on the market at the time. Meaning, depending on your mortgage type, your buy-to-let mortgage may be affected by the increased base rate, or it may not.
Capped Rate Mortgages
Similar to a variable rate mortgage, a capped mortgage interest rate will fluctuate depending on the Bank of England’s interest changes. However, unlike a variable rate mortgage, a capped mortgage will have a limit placed on how much its interest rate can increase.
How The Levels Financial Can Help
With the changes in the base rate, mortgage rates may be affected when you’re applying for your first mortgage or going through the process of remortgaging. With access to over 12,000 mortgages from over 90 lenders, exclusive products and the latest rates, our qualified mortgage advisors can help you secure the most suitable mortgage for you.
If you’re concerned about your current mortgage, our team of expert mortgage advisors are on hand to explain the change of base rate and its potential effects it may have on you. For more information or to book your free initial consultation, contact the team today at admin@thelevelsfinancial.co.uk or give us a call on 01458 772040.
Just A Heads Up…
- You may have to pay an early repayment charge to your existing lender if you remortgage.
- If you do not keep up with your remortgage repayments your home may be repossessed.
- A fee may be included for mortgage advice. The actual remortgage amount you pay will differ depending on your circumstances. Fees can be up to 1%, but typically a fee is 0.3% of the borrowed amount.
