Bank Of England rates up 0.25% to 1%

The Bank of England have today raised interest rates by 0.25% to 1%. Which is the highest level in 13 years, with inflation set to reach 10% by the end of the year – a level we haven’t seen since 1982.

‘The Bank of England is on a hiking path, something many homeowners have not had to face for 13 years. Coupled with soaring cost of living, raised energy bills, and low consumer confidence, for many new buyers the prospect of housing affordability is sprinting away from them’, said Brian Murphy, at Mortgage Advice Bureau.

‘Banks will be falling over themselves to pass on the rise to variable rate mortgage customers before the ink dries on the Bank of England announcement. In fact, Halifax fell over its own shoelaces and accidentally announced its rise before the Bank of England’s decision.

Three quarters of mortgage holders are protected by a fixed rate mortgage, but while they’ll be reaping the benefits during the fixed period, it means they’ll feel the impact in one fell swoop when their mortgage expires. The Bank’s efforts to bring in rates gradually and smoothly will be no use to anyone who remortgages and sees their rates jump overnight. 1.5 million of these fixed rates are set to expire this year.

If you have six months or less left on your current mortgage deal, you can apply for a remortgage rate today, and lock in a deal in case rates rise again. If you have longer until your fix comes to an end, there’s time to plan for how you’ll cover the extra costs. Ideally, you’ll be able to track down costs to cut elsewhere in your budget, to free up more cash for your mortgage. You could even do that now and overpay on your mortgage, to limit the impact of future rate rises. If you’ve cut every cost possible, when the time comes you may be able to extend your mortgage, so your monthly payments are still manageable. However, this will mean paying more interest over a longer period, so it comes at a cost’, said Sarah Coles, senior personal finance analyst, at Hargreaves Lansdown.