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03 November 2017

Bank Of England Raises Interest Rate


The Bank of England has raised the benchmark interest rate to 0.5% from 0.25% which is the first increase in the base rate since July 2007.

This reversed the cut in interest rates from 0.5% to 0.25% in the immediate aftermath of the EU referendum vote last year.

In the UK there are approximately 9 million mortgage holders and consumer groups estimate that approximately 50% of these have never experienced an interest rate rise. Of the 9 million households that do have a mortgage around £4.4m of these are on fixed rates so will not immediately be affected by the increase in rates today.

However, according to industry body UK Finance, there are 3.7 million households on variable-rate or tracker mortgages and for these households, their monthly mortgages will now increase.

How much will my mortgage increase by?

The increase in the cost of the mortgage will depend on the outstanding balance, term remaining on the mortgage, the current rate being paid, and whether the mortgage is interest only or repayment.

Based on a repayment mortgage with a remaining term of 20 years and a current interest rate of 2% the increase in monthly payments will be as follows:

 


 


The increase in the interest rate today is the start of what is expected to be a gradual but limited increase in the base rate over the next 1-2 years.

There is however a wide variety of great fixed rate mortgages that are still available for those currently on variable rates and are concerned about the cost of their borrowing increasing.

Law Society (NI) Financial Advice provides expert financial planning services to members of the legal community in Northern Ireland and can be contacted on 028 9023 0696.

www.lawsoc-nifa.org