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Bank of England raises interest rates to 4% – How does this affect you?

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Here is how, whether you’re a homeowner or a property investor, the increase in interest rates to 4% might affect your mortgage. We are estate agents in Aylesbury with a mortgage advisor team.


Given most of us are tired of hearing about rising costs, it’s not exactly welcome news to learn that the Bank of England has raised interest rates to their highest level in 14 years. This indicates that the Bank of England base rate has increased for a total of ten consecutive times. However, it’s also crucial to keep things in perspective. Recently, interest rates have been at an all-time low, ranging from 0.10% to 3.5%. As of February 2023, it has increased to 4%*. Compared to what homeowners were paying just a decade or two ago, lending is still available at very low rates.


Let’s examine the current mortgage market in detail to help you comprehend what is happening, what it means for your mortgage, and what you can do.


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What is the base rate of the Bank of England?

The base rate, which is decided by the Bank of England, serves as a standard for the price of borrowing money. You must comprehend this because it affects the interest rates that mortgage lenders charge. As a result, the cost of borrowing will inevitably rise as the Bank of England raises its base rate.


What makes rising inflation a problem?

We are all acutely aware of the increasing cost of the weekly grocery shop and the rising cost of our energy bills. Every single thing we purchase is impacted by inflation. The cost of fuel, groceries, and other small increases can be used to gauge inflation. The rising costs of labour and materials are frequently passed along to you and me, the consumer, by manufacturers.

The Bank of England is attempting to lessen the impact of inflation by raising interest rates in an effort to ease the pressure.

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Will lower interest rates mean lower house prices?

It’s difficult to tell. The increase in house prices very much depends upon the supply and demand of property. With the supply of available property so low – and properties in short supply, the increased buyer demand ensures prices remain high. If, however, household finances are continually squeezed then experts do suggest that house prices will have slowed down by the end of the year.

Should a landlord be concerned?

No, absolutely not. Most economists agree that while inflation hurts economies, it can be advantageous for landlords, particularly if the price of your property rises at the same time as inflation. In essence, this means that your investment in bricks and mortar is increasing in value. Rents have also gone up significantly over the last few years; they now average over £1,000 per month**. Zoopla claims that renters are now paying £62 more per month*** than they were at the start of the pandemic. There is therefore still money to be made from property even though interest rates are rising in line with the base rate. For landlords, this is welcome news.

Your next steps...


You do have choices, though. If your current mortgage isn’t that appealing, you might be able to switch to a new one. If there are affordable options available, this might be worthwhile. The interest rate increase won’t have an impact on you, though, if you are currently paying a fixed rate. You might have to pay an early repayment fee if you are on a fixed rate and try to switch to a different rate. Our mortgage advisor at WeSoldIt are here to help with access to a range of remortgage options. 

Is there any good news with the increased interest rates?


Truth be told, yes. It’s not all bad news! It’s important to keep in mind that you’ll be able to find a better mortgage deal the more of your mortgage you’ve paid off. Lenders are more likely to offer you a low rate the more equity you have in your home. Therefore, if the value of your home has increased, your loan-to-value ratio has likely also increased. This implies that you might have access to more options from different lenders and end up paying lower rates. If you are unsure which options would be best for your particular situation, we would always recommend that you speak to a qualified mortgage advisor in Aylesbury. If you’d like, you can talk to a mortgage expert right away, click the button below.

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