UK interest rates raised by Bank of England

For only the second time in a decade, the UK interest rate has been raised – it's now at its highest level since March 2009. The Bank of England’s Monetary Policy Committee (MPC) voted unanimously on 2nd August 2018 to increase the UK interest rate from 0.5% to 0.75%.

Across the UK, this action will increase the interest costs of more than 3.5 million residential mortgages that have variable or tracker rates. However, it is likely to be appreciated by savers who could see a lift in their interest rates over the coming months. Although, after the last increase in November 2017, half of savings accounts did not move.

Peter McGregor, Independent Mortgage Adviser with ESPC Mortgages, said: “As widely expected the Bank of England have raised interest rates by one quarter of a basis point. This means that the base rate is now 0.75%. With falling unemployment and continued growth in the economy, the BOE is bringing in this rate rise to manage inflationary pressures and keep inflation under control. The BOE has, for some time now, suggested that they would introduce gradual and incremental rate rises.

“This is the highest the rate has been since March 2009; however, it is still incredibly low by comparison to higher rates suffered by borrowers over the last 25 years.

“The increase is hoped to be good for savers, as, if the banks pass on the increase, savings will earn more interest on their deposits.

“With regards to borrowers, inevitably, this means the cost of borrowing will rise. For mortgage borrowers tied in to a fixed rate at this time, this will have no immediate effect. However, any borrowers on a lenders’ standard variable rate may see an increase in their monthly repayments as and when lenders pass on the increase. Indeed, Barclays Bank have already announced this afternoon that their own base rate will rise by 0.25% with effect from 2nd August 2018 for new borrowers and 1st September 2018 for existing borrowers.

On a typical variable rate mortgage of £150,000, the monthly increase in payments will be around £18 per month.”

As independent mortgage advisers, ESPC Mortgages can help with all aspects of understanding your budget, applying for a mortgage and dealing with the relevant insurance requirements. Pop in for a no obligation chat with Peter or one of the team at our Edinburgh Property Information Centre or give them a call on 0131 253 2920.

The information contained in this article is provided in good faith. Whilst every care has been taken in the preparation of the information, no responsibility is accepted for any errors which, despite our precautions, it may contain. No Individual mortgage advice is given, nor intended to be given in this article.

The initial consultation with an adviser is free and without obligation. Thereafter, ESPC Mortgages charges for mortgage advice are usually £350 (£295 for first time buyers). YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR OTHER LOANS SECURED AGAINST IT.