Interest rate rise — May 2023

The latest from the Bank of England

Interest rate rises have been in the news again. We know, it's a lot of information to take in.

You may have some questions about what it means for you — whether you’re thinking of buying, selling, or just wondering about your current mortgage. Don’t worry, we’ve got you covered.  Let's take it step by step.

What happened with interest rates today? 

The Bank of England, which sets the base interest rates, has raised rates for the 12th time in a row. The bank of England meets 8 times a year to set rates, so we've seen about a year and a half of consecutive rises.

The important part to know? Rates rose by .25%, so the current base rate is 4.50%.

Why did rates go up? 

In short? Inflation. Earlier this year, some were speculating that interest rates had peaked. That basically means that they would hold at the same level, before starting to come back down again. But so far, that hasn't been the case.

Continuing pressures of inflation mean that the Bank of England felt forced to hike rates again, though some experts predict they could now begin to level off before starting to fall up gradually next year.

Why? Well, potentially, because things like the wholesale cost of energy start to fall, so inflation may fall along with it and rates can come down.

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.

What does it mean for the housing market? 

Honestly, that depends. We'd love to pretend we can predict the future — but that's just not true. We can say that in general, higher interest rates are passed onto borrowers through higher mortgage rates, which can decrease the demand from buyers and push house prices down.

Some think we’ll still see the market continue to slow, while others have pointed out that house prices seem to be bucking the trend and even rising in some places.

The truth is, we’ll have to wait and see. There have been other changes in the housing market — like the new 100% mortgage aimed at helping renters get on the property ladder (read what Money Saving Expert thinks about that here) — so there are a lot of factors we'll have to keep an eye on.

What does it mean for my mortgage? 

OK, this is where you might be the most directly affected by the announcement — but that depends on the kind of mortgage you have.

If your rate is locked in (often known as a “fixed” mortgage), then it won’t mean anything — your rate should stay exactly the same, at least until the end of your fixed-rate period. If you have a variable rate, there’s a good chance your mortgage rate will be rising, so be sure to talk to your lender. If you’re worried about your mortgage or want to see if there’s a way to reduce your payments, you can always get in touch.