Another Bank of England Interest Rate Rise
The 14th successive rise in the base rate has sent the UK reeling. Mortgage offers and savings accounts will both be affected by this change, but mortgages more so. Tracker deals are facing a near £24 extra a month on average. As inflation has been incredibly stubborn, the Bank of England has had no choice but to increase the base rate to 5.25%. The body also warns that the country is not safe from further rises just yet.
Mortgages have gone up at least £300 since the start of these interest rate hikes. National World estimates homeowners on standard variable rate (SVR) mortgages went up by £311.90 and tracker deals by £488.50. This is assuming that all base rate rises were passed onto consumers.
Positive Money led a demonstration outside the Bank of England last week, calling on the government to implement a windfall tax on bank profits. The group argues that hiking interest rates in a cost of living crisis is unethical and believes forcing a recession should not be the way to operate. Campaigners are calling for bank reform and believe the flawed attempts of combatting inflation are worsening the cost of living.
The argument is that bank profits have increased exponentially due to these interest rate hikes while the general public has been suffering as a result. The excessive profits garnered by the banks could have a windfall tax applied to them to help those most in need, according to the group. It’s a collective concern that is affecting those with mortgages and those renting.
For most people, a good 80% have fixed rate mortgage deals. This means that any increases in rates will only happen when their current deal comes to an end. Approximately 800,000 fixed rate deals are ending within the next 6 months and 1.6 million are coming to an end next year. Those coming out of their current deals may face double or triple the percentages they were already on.
Anyone coming out of a fixed rate mortgage deal in the next few months will face much higher monthly payments, which some landlords will force onto their tenants. The private rented sector is now becoming increasingly more unaffordable to those on low or middle incomes, which is one of the reasons Positive Money is protesting.
In December 2021, the average two year fixed rate mortgage was 2.34%. It’s currently sitting at 6.85%. In more hopeful news, banks were already predicting another interest rate rise from the Bank of England, so this was already factored into their deals. As such, current offerings are unlikely to change much, if at all.
The government has proposed a new Mortgage Charter, backed by the Financial Conduct Authority, to try and help households most affected by these mortgage rate increases. The £94 billion plan is meant to redouble the efforts from banks to help consumers and customers if they are struggling to pay. If you are struggling or you are worried about your new remortgage rate, you are advised to talk to your bank and find out what support they have available.