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

The Bank of England has increased base rates to 0.25% from 0.1% after the Monetary Policy Committee (MPC) voted in favour of the first rise in more than three years. The base rate is used by the central bank to charge other banks and lenders when they borrow money – and influences what borrowers pay and savers earn.  

The increase comes on the back of official data published in December that showed prices rising at the fastest rate for more than a decade, which had prompted calls for interest rates to increase in order to help dampen price spikes.

The rise also came despite concerns the Omicron variant might derail the economy by triggering consumers to spend less. The MPC voted eight to one in favour of the increase. 

If you want to check what this means for you, see our mortgage and savings tables below.

Martin Lewis

'While the rise itself isn't huge, the signal is'

Martin Lewis, founder of MoneySavingExpert.com, said: "A UK base rate rise was widely flagged last month, but didn’t happen. This month with the rise of Omicron and a hit on the economy, far fewer expected it, but the Bank surprised us.

"While the rise itself isn’t huge, the signal is. For the bank to overcome its inertia says a lot. This is the first rate rise in three years – and I suspect (unless we move back into lockdown and the economy tanks again) it’s indicating it’s only the beginning, more are to come.

"The rise is of course driven by high UK inflation. Prices are rising at their fastest rate for years, and the Bank of England is charged with preventing that happening. By increasing interest rates, the theory says you encourage saving and discourage borrowing, taking cash out of the economy, and slowing things down.

"The problem is that it’s the price of fuel and energy which is driving inflation. That is a global problem, unlikely to be fixed by unilateral UK moves. Plus we know already that come April, there will be a likely 40% rise in the energy price cap regardless of what the Bank of England does. So we have to wait and see if its interest rate lever is powerful enough to lift things back in to place.

"In practical terms, I’m afraid it is likely mortgage holders stand to lose more than savers gain. For variable rate mortgage holders, the typical £8/month rise per £100,000 of mortgage, will be far from welcome amidst the other huge price rises we’re seeing in energy bills and fuel. So it’s important, especially for those on the standard variable rates (SVR), where lenders have the freedom to increase rates by more than the 0.15% – to see this as a spur to check if you can save by getting a better mortgage deal.

"For savers, we may see some easy access rates rise at the big high street banks, but they’ll still be crap – often less than 0.1%. There is a chance fixed rates may rise a smidge more on the back of the announcement, so there’s no rush to do it (just don’t forget), but if it does happen it’s not likely to be a substantial rise in the short term.

"Instead, for most people the impact of the rate rise is trivial compared to just switching to the best easy-access accounts on the market at over 0.7%. In fact a far cuter move right now for most savers, if you won't need the money for the next year or so, is to consider putting some money in a top fixed savings – where you'll get nearly double the rate of even the top easy access accounts."

I have a mortgage. What happens now?

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. 

What action mortgage providers plan to take

PROVIDER CHANGE TO TRACKER MORTGAGES CHANGE TO SVRS
AA Under review 
Atom Bank Under review 
Bank of Ireland 0.15 percentage point increase from 1 Jan 22

0.15 percentage point increase from 1 Feb 22 

Bank of Scotland 0.15 percentage point increase from Feb 22 Under review
Barclays 0.15 percentage point increase from 1 Jan 22
Clydesdale 0.15 percentage point increase from Feb 22

SVR will reduce by 0.06 percentage points to 4.49%, to align the rate with the Virgin Money SVR.

The Offset Variable Rate will increase by 0.15 percentage points to 4.70%.

Co-op Bank 0.15 percentage point increase from Feb 22
Coventry BS 0.15 percentage point increase from Feb 22 Under review
First Direct 0.15 percentage point increase from 16 Dec 21 Under review
Halifax 0.15 percentage point increase from Feb 22
Hampshire Trust Bank Waiting to hear  
HSBC 0.15 percentage point increase from Feb 22 Not at this stage
Investec Under review 
Kent Reliance BS Waiting to hear 
Leeds BS 0.15 percentage point increase from 16 Dec 21 Remains unchanged
Lloyds 0.15 percentage point increase from Feb 22 
Masthaven Waiting to hear 
Metro Bank

0.15 percentage point increase from 16 Dec 21

Under review
Nationwide 0.15 percentage point increase from Feb 22 Increasing from 3.59% to 3.74% from 1 Feb 2022
NatWest 0.15 percentage point increase from 16 Dec 21 Under review
Newcastle BS 0.15 percentage point increase from 30 Dec 21  0.15 percentage point increase from 1 Feb 22 - excluding Triple Access Saver and Monthly Access Saver
OneSavings Bank Waiting to hear 
Paragon Waiting to hear 
Post Office 0.15 percentage point increase from 1 Jan 22 0.15 percentage point increase from 1 Feb 22
Principality Under review 
RBS 0.15 percentage point increase from 16 Dec 21 Under review
Sainsbury's Bank 0.15 percentage point increase from  1 Feb 2022 Under review
Saga Under review 
Santander 0.15 percentage point increase from Feb 22, incl Santander Follow on Rate
Scottish Widows 0.15 percentage point increase from Feb 22
Skipton BS 0.15 percentage point increase from 31 Dec 2021 Under review
TSB 0.15 percentage point increase from 'early 22' Under review
Ulster Bank 0.15 percentage point increase from 16 Feb 21 Under review
Virgin Money
0.15 percentage point increase from Feb 22

To increase by 0.15 percentage points to 4.49%.

The loyalty rate, for customers who have held their mortgage for seven years or more, will increase by 0.15 percentage points to 4.24%.

West Brom BS 0.15 percentage point increase from Feb 22 Not at this stage
Yorkshire Bank 0.15 percentage point increase from Feb 22

SVR will reduce by 0.06 percentage points to 4.49%, to align the rate with the Virgin Money SVR.

The Offset Variable Rate will increase by 0.15 percentage points to 4.70%.

Yorkshire BS 0.15 percentage point increase from Feb 22 Under review

This table refers to domestic mortgage rates only - changes may differ for buy-to-let mortgages. 

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. 

If you are thinking of switching...

These are our current top picks, but they could change at any time - for a full round-up see our Top Savings guide:

  • Up to 0.71% easy access - Investec pays the top easy-access rate of 0.71%, though you must save £5,000 or more to open the account.
  • Up to 1.39% with a one-year fix - Masthaven Bank pays the top one-year fixed rate of 1.39% and its account can be opened online with £500 or more. Plus, it's also the top account for monthly interest. 
  • Up to 1.61% with a two-year fix - Zopa pays the top two-year fixed rate of 1.61%, while Hodge Bank is the top payer for monthly interest at 1.54%. Both accounts can be opened online with £1,000 or more.

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