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Whatever your wealth & protection enquiry, we will endeavour to be of assistance to you.

BANK OF ENGLAND BASE RATE INCREASES TO 5 PER CENT

June 22, 2023

SPF

The Bank of England has increased the base rate by 50 basis points to 5 per cent. It is the Bank’s 13th consecutive rise and comes on the back of no move in twelve-month consumer price inflation (CPI) in May, which remained stuck at 8.7 per cent.

Seven members of the nine-strong Monetary Policy Committee voted for a 0.5 percentage points rise, while two members preferred to maintain the bank rate at 4.5 per cent.

Fixed rates are influenced by future base-rate movements and therefore not directly linked to what is decided this week. Lenders have already priced in this rate move and increased the pricing of their fixed-rate mortgages, with many borrowers coming off particularly cheap deals now facing a payment shock when they come to remortgage.

Those on base-rate trackers will find their mortgage rate increase by a further 50 basis points. A borrower with a £250,000 repayment mortgage on a 25-year term and a pay rate of 4.5 per cent will see that rise to 5 per cent, with monthly payments rising from £1,390 to £1,461.

13 successive rate rises

The cumulation of 13 successive rate rises is significant. A borrower with a £250,000 mortgage on a tracker pegged at 1 per cent over base rate will have seen their monthly payments rise from £943 in December 2021, when base rate rose from 0.1 per cent to 0.25 per cent, to £1,611 today.

With a variable-rate deal, the link between the lender’s variable rate and base-rate moves are less transparent. The lender may decide to pass on none, some, all or more than the base-rate rise.

There is plenty of concern about rising rates, particularly among those borrowers coming up to remortgage. Our advice is to plan ahead as much as possible and take action now. Rates can be booked up to six months before you need them; if rates have fallen by the time you come to remortgage, you should be able to opt for a cheaper deal.

If you don’t need to remortgage in the foreseeable future, you should still take action: pay down other debt, cut unnecessary spending and consider overpaying on your mortgage if possible to lessen the pain when the time comes.

With so much volatility in the markets, it is more important than ever that borrowers get in touch with a mortgage adviser to find out the options available to them.

SPF Market Commentary Blog 22.06.23

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

SPF Private Clients is authorised and regulated by the Financial Conduct Authority (FCA). The FCA does not regulate some forms of buy-to-let and commercial mortgages.