Feefo Platinum Trusted Service Award 2024
Free £100 Gift Card Offer

Our Insurance Partners.

Sign up for our newsletter

Stay in the loop about all the latest news, exclusive offers, and fantastic discounts. We promise it's spam-free!

BoE raises interest rates for the 11th time

The Bank of England (BoE) has voted to raise UK interest rates for the 11th time in a row. Their Monetary Policy Committee (MPC) has decided to increase rates yet again – from 4% to 4.25%.

Inflation had been expected to drop which would lead to lower interest rates, but it instead jumped up from 10.1% to 10.4%. This is due to the increasingly higher cost of essentials such as electricity, gas, food and more.

These higher rates will likely have a big impact on most UK households, with many people already struggling with the increasing cost of living in the UK.

In this blog, we will explain more about why interest rates are rising and how this could affect your household bills and mortgage this year.

In this section (BoE raises interest rates for the 11th time):

The Bank of England’s interest rates are directly tied into the rate of inflation. The higher the cost of goods and services in the UK, the higher inflation is at that moment in time.

The Bank of England increases their interest rates when inflation begins to climb dramatically. The idea behind this is that if interest rates are higher, demand for things such as loans and mortgages will decrease. This should in theory help to stabilise the economy.

It had been expected that interest rates would rise again later this year to around 4.5% (a 0.5% increase to the previous figure). This now seems to have been brought forward due to inflation not behaving as expected, though the percentage increase is lower (0.25% increase).

The peak at 4.5% will likely still occur by the time we reach summer 2023. Though interest rate rises are not ideal, this recent rise is the first time since June 2020 that the BoE has raised the rate by less than 0.5%.

How will interest rates affect me and my monthly bills?

If you have any regular monthly expenses such as car finance or credit cards, you will probably need to budget a little more for this from now on.

Most lenders will use the Bank of England’s base rate to assess their own rate of interest charged for borrowing money (loans, credit cards and other products). This means any payments you usually make are at risk of increasing over the next few months.

For the time being the Government are still helping to support energy bills through this period of higher inflation. They have agreed to extend their Energy Price Guarantee to the end of June 2023, capping energy bills for average usage at £2,500 per year.

Various other support schemes and changes were announced recently in the Spring 2023 government budget.

How will interest rates affect my mortgage?

Mortgage interest rates will probably increase for many current mortgage holders and new borrowers over the course of 2023. Whether you are affected and how much will depend on the type of mortgage you have.

  • Those on a tracker mortgage will have their payments directly impacted, as the interest they pay is always based on the BoE base rate.
  • Anyone on a Standard Variable Rate mortgage (SVR) could see higher mortgage rates (and increased mortgage repayment amounts), but whether lenders increase their variable rate is down to their own discretion.
  • If you have a fixed rate mortgage deal, you shouldn’t need to pay more yet as payments are set to the same amount each month for a fixed term.

If inflation drops quickly (it is thought a sudden fall to around 2.9% may occur), this can have a big impact on the ability to access credit such as new mortgages or remortgages.

If you are worried that you will struggle with your monthly payments for your mortgage this year, there are a few things you can do:

1.    Speak to your lender to see if there are any support measures in place you can take advantage of e.g. payment holidays or extending your mortgage term

2.    Look into government support schemes (e.g. Support for Mortgage Interest)

3.    Act sooner rather than later if you believe you may end up in debt

4.    Consider remortgaging to a fixed rate deal to avoid further rate increases for the time being

Don’t struggle in silence as there are definitely options available to make sure you don’t default on your mortgage or lose your home altogether.

Our mortgage EXPERTS can provide a FREE review of your mortgage, to help you work out the best way to move forward. They can search rates and deals across over 50 of the UK’S TOP MORTGAGE LENDERS to help you find an affordable mortgage that is suitable for you.

Resources

Gov.uk – Support for Mortgage Interest (SMI)

MoneyHelper – Government help if you can’t pay your mortgage

Sign up for our newsletter

Stay in the loop about all the latest news, exclusive offers, and fantastic discounts. We promise it's spam-free!

Open chat
How can we help?
Scan the code
Welcome to iam|INSURED 👋

Please feel free to connect with us on WhatsApp so we can help you and answer your questions.

Click “Open Chat” to start.