For the fifth consecutive time the Bank of England has chosen to increase interest rates – a rise from 1% to 1.25% – reaching a 13-year high.
It also looks like there will be more interest rate hikes coming in the near future, with some committee members voting for more a more aggressive hike of 0.5%.
This means that those on variable rate mortgages will see their monthly mortgage payments increase yet again. Unfortunately, these increases come at a time where many are already having to cope with steep increases to the price of food, petrol, and energy.
Why is this Happening?
The Bank of England is raising the rates in order to combat the continuing increases in cost of living. Inflation in the UK is currently at 9%, a 40-year high, and is predicted to reach up to at least 11% before the end of the year.
While inflation is a normal occurrence, the Bank of England usually aims to keep it around 2%. These high levels of inflation are currently a problem across the globe, caused by high energy and fuel prices, and disrupted supply chains due to a combination of Covid-19 and the current conflict happening in Ukraine. Due to this, the actions of the Bank of England are in line with most countries’ central banks.
Who Does this Impact and What Should I Do?
These changes won’t affect everyone, those on fixed rate mortgages will be protected from the current, and any future rises until their current deal expires.
Those coming to the end of a fixed rate mortgage should start looking for a new deal to shelter themselves from higher rates in the near future.
Some economists are predicting that the bank rate could go as high as 3% next year. So, for those who are on a variable rate or tracker mortgage, it may also be worth considering remortgaging on to a fixed rate deal to protect yourself from further increases.