Bank of England base rate jumps to 0.25% - what the rise means for you

According to figures from financial trade body UK Finance, around 74% of all current mortgages are fixed, while around 96% of mortgages handed out since 2019 have been on fixed rates, meaning for the vast of majority of mortgage holders, nothing will change. 

The key points for mortgage holders are:

• Fixes are fixed – but lock in again now if yours is coming to an end soon. As the name suggests, rates WON'T change during the fixed period – though any new fix you remortgage to in future may end up being more expensive now the base rate has risen, so you might want to check if you can fix now if your current deal is approaching expiry. 

• Lenders MAY raise standard variable rate (SVR) or 'discount' mortgages. These move at the whim of lenders. We're checking with the big lenders now what they plan to do but expect them to rise (see the table below). You'll usually be on an SVR after your fix or tracker ends. A 'discount' mortgage, meanwhile, follows the SVR at a set rate, eg, if the SVR is 4% and the rate is SVR minus one percentage point, it's 3%. 
  
  
• On a tracker mortgage? Rates will increase. As the name suggests, these 'track' the base rate, so mortgage costs will go up, so check now to see if you can switch to a better deal.

What should I do?

• If you're on a fixed rate that is coming to an end in the next three to six months, you should start speaking to a mortgage broker now to see if you can remortgage onto a better deal, as you are able to lock in deals available now for the next few months.

• If you're on a standard variable rate (SVR) or 'discount' mortgage, your mortgage is likely to rise by 0.15 percentage points, as most loosely follow the base rate. If you're on a tracker mortgage your rate will definitely rise by the same amount as the base rate - 0.15 percentage points. SVRS are pricey though and tracker mortgage rates are definitely set to increase, so if you're on one, consider fixing now in case rates go up further. 

Ray Boulger, mortgage expert at broker John Charcol, says: "Even though it wasn't obvious whether today would see the first rise in the current cycle, the direction of travel was clear and today's increase was already reflected in mortgage rates. However, future increases have not and, as the market factors in further increases, we can expect mortgage rates to rise further.

"As many mortgage offers are valid for six months, anyone whose current rate expires by the middle of 2022 should consider locking into a new fixed rate asap."

If looking for a new deal, see our Remortgage Guide or First-Time Buyers' Guide for help, plus our Mortgage Best Buys comparison tool for the top deals.

The below table details what the major lenders have told us they'll do in response to today's base rate announcement. 

I'm a saver - what is happening?

The rate increase could affect all types of savings accounts, including traditional savings accounts, savings accounts that are linked to your current account and ISAs. For savers, rate rises are generally good news - although most savings rates at the minute are still poor. 

However, unlike mortgages rate rises, which many lenders have already confirmed will be coming in over the next few months, all of the major providers bar three are still deciding what to do with their savings rates. Of the three that have confirmed their positions:

• NS&I will increase the rate on all of its variable savings products - its Direct Isa, Direct Saver, and Income Bonds - by 0.2 percentage points from 29 December 2021. 
• Santander will increase its variable savings rate by 0.15 percentage points from 12 January 2022. This will affect two accounts; Rate for Life and Good for Life. 
• Tesco Bank will add 0.15 percentage points to its variable savings rates from 11 January 2022.  

What should I do?

• If you're on a fixed rate account, the rate is locked in for a set amount of time and won't change, however it might be worth shopping around for a better deal, if there is one. 

• If you've a variable rate account, then your rate could go up, though this isn't guaranteed - each bank decides on its own increase and the timing of when this happens. We're checking what the big banks are doing - see the table below, which we will update when we know more. Whatever rate you're on currently, it may be worth waiting a few days to see if best-buy rates rise before switching.