Mortgage interest rates update February 2023
The Bank of England has today reviewed its base rate and has voted for the 10th consecutive increase by 0.5% to a 14 year high of 4%.
According to reports, 7 out of the 9 members of the Monetary Policy Committee voted to increase the rates by 0.5%. The language being used in the report from the meeting suggests that we might be close to a peak.
Mortgage interest rates have been gradually increasing for the past 12 months and are set to settle towards the middle of the year. Mortgage borrowers are seeing significant increases to their monthly mortgage repayments and are urged to review their deal.
Borrowers have been shocked by the sudden increase in interest rates from almost 0% to the current rate of 4%. An increase of 0.5% can mean on average around £55 extra per month on your mortgage repayments.
What should I do with my mortgage?
There are two main groups of mortgage borrowers which are those on a current deal who may or may not have a penalty for early repayment, and those who are currently on a standard variable rate.
According to latest figures, there are an estimated 150,000 borrowers whose fixed or discount deals are due to come to an end this quarter alone.
Our mortgage expert, Craig Heyward says “interest rates going up is clearly not good news for mortgage borrowers all over the UK, but there are some positives in the mortgage market as a whole. We have recently, even in the past few days, seen several lenders actually reducing their fixed rate deals. The overall outlook is still finely balanced but the long-term forecasts are more positive, with fewer interest rate rises expected from the middle on 2023”.
You should speak to one of our team of fully qualified mortgage experts to find out more about your mortgage options.
What does 0.5% increase mean for me and my mortgage?
Increasingly there are more and more mortgage borrowers that have a variable rate mortgage. Anyone currently on a Tracker rate mortgage or who are on a lenders Standard Variable Rate (SVR) will see the effects quickly.
In our example, we show what a 0.5% increase will mean to borrowers.
Mortgage amount: £200,000
Mortgage term: 25 years
Mortgage type: Repayment (Capital & Interest)
Previous interest rate: 3.5%
Previous repayment: £1,001 per month
New interest rate: 4.0%
New mortgage repayment: £1,056
The difference in this scenario is £54 per month, or £648 per year.
What’s going to happen next to mortgage interest rates?
Interest rates are now projected to continue to increase again at the very next meeting of the Bank of England by 0.25% to 0.5%.
There are a number of factors that are being factored in to the economists’ predictions, including lower costs of energy than were projected. There are also a number of other reports that suggest that our economic recovery might be slow.
We are currently hearing that the projected recovery could be as long as 2026 before we start to see any major improvements.
Of course there are no guarantees to any predictions and there are a number of external factors that are unknown. Currently the next interest rate review is finely balanced which means that we could even see a move to remain at 4.0%.