The Bank of England has increased interest rates to 0.75% – it’s just the second time in the past decade that interest rates have gone up, but what will mean for you?
Well, the small rise will have the biggest effect on homeowners with variable and tracker rate mortgages (which is around 3.5 million people), although increases for most are likely to be fairly minimal.
Every mortgage taken out in recent years has been subject to much stricter lending affordability criteria than ever before, so any rate increases should have been factored in. And besides, a huge majority (about 95%) of mortgages issued in the past year are on fixed rate deals.
Meanwhile, base rates, while at their highest level for nine years, are still very low by historic standards and mortgage rates remain low. The question we are being ask by potential borrowers though is, is this the start of many increases?
The short answer is that any further rate rises before the end of the year are extremely unlikely. The Bank of England has suggested that any future increases will be gradual with the next small rise (0.25%) in mid-2019 and a further one before the end of 2020.
So the key message is – don’t panic!