Today the Bank of England raises the Base Rate by 0.25% from 3.75% to 4%
John Davison, Head of Product, Proposition and Distribution at Perenna, commented:
“Today’s rise will not only increase repayments for borrowers on tracker mortgages, but it will also add to the uncertainty facing people trying to buy a home and those in long-term renting. While some measures in last week’s Budget offered some measures to help with the cost of living, that help will feel limited to someone whose housing costs leave little room to save each month.
“For aspiring homeowners, the difficulty is saving a deposit while continuing to meet the rent. Some could afford sustainable mortgage repayments but remain excluded by deposit requirements or lending criteria that fail to account for their circumstances. On top of that, the Budget’s further increase in property income tax from April could also put pressure on rents if landlords seek to pass on some of the cost. Those barriers need attention alongside the immediate pressure on household bills.
“A healthy, functional renting ecosystem goes hand in hand with a healthy first-time buyer market. We need a more proactive approach that supports the rental market, not one that punishes it.”
KEY TAKEAWAYS:
- The Decision: Bank of England lifts Base Rate from 3.75% to 4%.
- Monthly Cost Impact: A 0.25% rise adds approximately £28–£32 a month (around £350 – £380 a year) to an average £200,000 tracker mortgage.
- SVR Warning: Standard Variable Rates (SVRs) already sit above 7%; a further hike leaves off-deal borrowers exposed to the steepest borrowing costs of the year.
- Broker Advice: Borrowers with deals expiring within the next 6 months should lock in a rate now – services like the Mojo Rate Check Promise allow customers to switch down if cheaper rates emerge before completion.
John Fraser-Tucker, Head of Mortgages at Mojo Mortgages:
“Following months of base rate stability at 3.75%, the Bank of England’s decision to increase the rate to 4% signals a clear shift in policymakers’ priorities as persistent inflation forces their hand.
“Borrowers holding out for interest rate relief towards the end of the year will feel this blow directly. Tracker customers will see repayments rise in line with this increase, while lenders are expected to pass this on to Standard Variable Rates, tightening household budgets even further into the winter months.
“The chances of of immediate rate cuts has been put on hold for now. For anyone coming towards the end of their deal, letting your mortgage roll onto a lender’s Standard Variable Rate could easily be the most expensive mistake a borrower could make right now.
“Our advice to anyone on the fence is to look into your options as early as possible within the six month lead-up to your deal expiring. Securing an offer early acts as financial insurance. If rates climb further over the winter, your rate is locked in. Through our Rate Check Promise, borrowers don’t lose out if the market pivots either – if a cheaper deal becomes available before completion, you can switch down without penalty.”
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