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Interest rate rise — June 2023

The Bank of England has raised interest rates — for the *13th* time in a row. What does that mean for you?


The latest Bank of England announcement

The Bank of England has just announced that interest rates will go up again — marking the 13th increase in a row. For anyone with a mortgage, or looking to get one, this news can be daunting.

You may have some questions about what it means for you — that's what we're here for. We'll break down the latest rise and how it might affect your current mortgage.

What happened with interest rates today? 

The Bank of England, which meets 8 times a year to set the base interest rates, has raised rates for the 13th time in a row.

They voted to raises rates by .5%, so the current base rate is 5%.

Why did rates go up? 

The main goal of raising rates is to keep down inflation — although there was some hope that inflation would start falling meaningfully on its own, that hasn't happened. In fact, data earlier in the week showed that inflation was still at 8.7%, which is why many of us are feeling the pinch. The Bank of England is meant to keep inflation at a target rate of 2% — and we're not anywhere close. So raising interest rates up is to try and bring inflation down.

Some are saying with inflation so high we have more painful rate hikes on the horizon. But let's be honest, experts don't have a great track record in predicting interest rate rises and falls over the past few years — so we think it's safest to wait and see what happens.

Despite the overwhelming feeling of being in financial free-fall at this time, homeowners need to take control."

Paula Higgins, Chief Executive of The HomeOwners Alliance

What does it mean for the housing market? 

We don't know yet. There are a lot of predictions out there, from a housing market crash to a more modest dip in prices. But nobody knows for sure, and the housing market has proved unpredictable over the last few years.

We do know that higher interest rates are passed onto borrowers through higher mortgage rates, which can lower their buying potential and drive prices down — and we also know there have been signs of a house price dip.

But in the long term? It's too early to tell.

What does it mean for my mortgage? 

That depends on the type of mortgage you have. If you a fixed-rate mortgage, where your rate is locked in, then everything should stay the same — at least until the end of your fixed-rate period.

If you have a variable rate or if your rate is coming to an end soon, that's when you're most likely to be affected.

If your rate is ending soon, you can take action. "While rates look horribly high, and they are, they still aren't as bad as your lender's Standard Variable Rate - which could be as high as 8%," Paula Higgins, Chief Executive of The HomeOwners Alliance, explains. "This is the rate you default to if you don't switch in time. So if your deal ends later this year, don't 'wait and see'. You can lock in a mortgage rate now and keep it under review."

Many experts are saying something similar — locking in for a rate before your current deal is up, with the potential to find a better one if rates go down.

Should I overpay?

Maybe. Many of us are not in a position to overpay, but if you are then it might be worth considering it — or putting money aside to overpay when your mortgage term is ending. The truth is, it's all down to your circumstances. Money Saving Expert has a great explainer and calculator, to help you work out if it's the right choice for you.

But no matter what, if you're worried about your current deal, talk to your lender to see if they can offer any help. If you're rate is coming to an end or you're looking at your options, you can always get in touch

What’s next? 

We know, you probably don't want another update like this again — but it's our job to keep you in the loop, so we'll be here every step of the way. The Bank of England sets rates 8 times a year and the next time is August 3rd, so we’ll be sure to keep you posted. In the meantime, we're here if you need us.