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Bank of England base rate jumps to 0.5% – what the rise means for you

The Bank of England has increased base rates to 0.5% from 0.25% after the Monetary Policy Committee (MPC) voted in favour of a rise. 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.

Five members of the MPC voted in favour of the rise to 0.5% while four voted to raise rates to 0.75%. The rise marks the central bank's first back-to-back increase since June 2004, after it lifted rates from 0.1% to 0.25% in December 2021.

The increase also comes on the back of official data published in January that showed inflation had risen to its highest level in more than a decade. The Consumer Prices Index (CPI) measure of inflation hit 5.4% in the year to January 2022. Periods of high inflation often lead to interest rate rises, in a bid to stop or slow people's spending, which may then suppress inflation.

Base rate rises may affect some borrowers' mortgages, unless they're on a fixed-rate deal. If you have a mortgage and want to check what your bank or building society is doing with its rates, see our mortgage table below. Savers are usually less affected by base rate moves, but if you have savings, a few banks and building societies are changing their rates.

You can also watch the video below for MoneySavingExpert.com founder Martin Lewis's immediate thoughts on the cost of living crisis, including the base rate rise.

Martin Lewis analyses today's energy price cap hike and also the base rate rise
Embedded YouTube Video

I have a mortgage. What happens now?

According to UK Finance, 74% of all current mortgages are fixed, meaning for the vast of majority of mortgage-holders, nothing will change. The key points for mortgage-holders are:

  • Fixes are fixed – but sort a new deal soon now if yours is coming to an end. As the name suggests, rates – and the amount you pay – WON'T change during the fixed period.
  • Lenders MAY raise standard variable rate (SVR) or 'discount' mortgages. These move at the whim of lenders. You'll usually be on an SVR after your fix or tracker ends. A 'discount' mortgage, meanwhile, follows the SVR at a set rate, for example, if the SVR is 4% and the rate is SVR minus one percentage point, it's 3%. As a general rule, mortgage payments will rise roughly £12 per month per £100,000 owed.

    We're checking with the big lenders what they plan to do with SVR rates and will add details to the table below.

  • On a tracker mortgage? Rates will increase. As the name suggests, these 'track' the base rate, so mortgage costs will go up. As a general rule, mortgage payments will rise roughly £12 per month per £100,000 owed. 

What should I do?

What you should do depends on what sort of mortgage you have now and whether you're close to the end of your initial mortgage term:

  • If you're on a fixed rate. Nothing will change with your existing deal, however, any new deal you remortgage to in future may now be more expensive. If you're close to the end of your current term, you might want to search for a new mortgage deal now. You can usually lock in a mortgage offer three to six months ahead of time.

    If you've six months or longer to go on your fix, you'll either need to wait for your initial deal term to run out, or pay the charge to leave early. Our Ditch your mortgage? calculator can help you decide.

  • If you're on a standard variable rate (SVR) or 'discount' mortgage. If you're on the SVR, you're free to remortgage to a new deal at any time. It's worth checking if you can, as SVRs tend to be pricey.

    If you're on a discount mortgage which has gone up, you may be able to remortgage without penalty, but do check. If not, you'll either need to wait for your initial deal term to run out, or pay the charge to leave early. Again, our Ditch your mortgage? calculator can help you decide.

  • If you're on a tracker mortgage. If you're concerned about this rise, or further rate rises, check now to see if you can switch to a better deal. However, do check if there are penalties to leave your current deal now – many trackers do have them. If not, then you're free to switch to another mortgage.

    If you do have early repayment charges, you'll either need to wait for your initial deal term to run out, or pay the charge to leave early. Our Ditch your mortgage? calculator can help you decide.

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. And, if you're in need of a mortgage broker, visit our Cheap mortgages guide for the full breakdown.

We've contacted a wide selection of larger mortgage lenders and will add their response into the table below as we get it.

Is your lender raising mortgage rates? 

PROVIDER CHANGE TO TRACKER MORTGAGES CHANGE TO SVRS
Bank of Ireland 0.25 percentage point rise from 1 Mar  0.25 percentage point rise from 1 Mar
Bank of Scotland 0.25 percentage point rise from 1 Mar  0.25 percentage point rise from 1 Mar
Barclays 0.25 percentage point rise from 1 Mar  0.25 percentage point rise from 1 Mar
Clydesdale 0.25 percentage point rise from customers' next pay date Under review
Co-op Bank 0.25 percentage point rise from 1 Mar  0.25 percentage point rise on Britannia, Co-op Bank & Platform mortgages from 1 Mar
Cynergy Bank Under review Under review
Coventry BS 0.25 percentage point rise from 1 Mar  Under review
First Direct  0.25 percentage point rise from 4 Feb Under review
Halifax 0.25 percentage point rise from 1 Mar  0.25 percentage point rise from 1 Mar
HSBC 0.25 percentage point rise from 4 Feb

0.25 percentage point rise from 1 Mar

 

 

Leeds BS 0.25 percentage point rise from 3 Feb 0.25 percentage point rise from 1 Apr
Lloyds Bank 0.25 percentage point rise from 1 Mar  0.25 percentage point rise from 1 Mar
Metro Bank 0.25 percentage point rise from 3 Feb Under review
Nationwide
0.25 percentage point rise from 1 Mar
0.25 percentage point rise for Base Mortgage Rate (BMR) and Standard Mortgage Rate (SMR) mortgages from 1 Mar 
Natwest Under review 0.25 percentage point rise from 1 Mar
Newcastle BS 0.25 percentage point rise from 17 Feb Under review
One Savings Bank Under review Under review
Post Office 0.25 percentage point rise from 1 Mar 0.25 percentage point rise from 1 Mar
Principality BS 0.25 percentage point rise by 1 Mar  0.1 percentage point rise from 1 Mar
RBS Under review 0.25 percentage point rise from 1 Mar
Sainsburys 0.25 percentage point rise by 1 Mar Under review
Santander 0.25 percentage point rise (including Santander Follow on Rate) by 1 Mar 0.25 percentage point rise from 1 Mar
Skipton BS

 

0.25 percentage point rise by 1 Mar

Standard Variable Rate (SVR) and Mortgage Variable Rate (MVR) will each increase by 0.10 percentage points from 1 Mar
TSB 0.25 percentage point rise from 1 Mar 0.25 percentage point rise from 1 Mar
Ulster Bank Under review 0.25 percentage point rise from 1 Mar
Virgin Money 0.25 percentage point rise from 1 Apr Under review
West Brom BS 0.25 percentage point rise by 1 Mar
0.1 percentage point rise from 1 Mar
Yorkshire Bank 0.25 percentage point rise from customers' next pay date Under review

Last updated 15 February 2022. This table refers to domestic mortgage rates only – changes may differ for buy-to-let mortgages.

I'm a saver. What happens now?

The base rate increase could affect all types of savings account. In general, savers benefit from base rate rises – although most savings rates are still relatively poor and rates didn't go up much after the last rise.

However, unlike mortgages rate rises, which many lenders have confirmed will be coming in over the next few months, most major providers are still deciding what to do with their savings rates. We have heard from a handful of providers that they'll be raising rates, and will add in any others over the coming days:

  • Coventry BS: Will increase variable savings rates by up to 0.25%. We've asked Coventry to confirm when rates will increase and will update this story when we know more.
  • HSBC: Will increase its UK Youth Savings rate by 0.25 percentage points, its Loyalty Cash ISA rate by 0.18 percentage points, its Flexible Saver and Premier Savings rates by 0.09 percentage points, and the bonus rate on its Online Bonus Saver by 0.2 percentage points.
  • Leeds BS: Will increase rates by up to 0.25 percentage points from 1 March. Its minimum member rate will also rise by 0.15 percentage points from 0.15% to 0.30%.
  • NS&I: Increased rates on its direct saver and income bonds by 0.15 percentage points to 0.5% from 0.35% from 10 February.
  • Post Office: Increased rates on some savings products to 0.05% (up from 0.01%) from 4 February. All other savings products will be kept under review. We've asked which products will see a rate rise and we'll update this story when we know more.

  • Principality BS: Will increase rates for most of its variable savings products on 1 March by 0.25 percentage points, with a small number of products increasing by 0.1 percentage point.

  • Santander: Rates on Rate for Life and Good for Life accounts will increase by 0.25 percentage points from 2 March.
  • Skipton: Will increase rates by no less than 0.25 percentage points from 1 March.
  • West Brom BS: Increased rates by up 0.25 percentage points on 9 February for tracker products. All other variable rate products will rise by 0.40 percentage points on 1 March.

Many banks and building societies don't raise rates in response to a base rate rise. Yet it's worth everyone checking the rate they're getting and seeing if they need to shift their savings.

  • If you're on a fixed-rate account, the rate is locked in for a set amount of time and won't change. Your cash is also usually locked in for the entire term, so you won't be able to switch for better rates.

  • If you've a variable-rate account, then your rate could go up, though this isn't guaranteed – each bank or building society decides on its own rates. Yet you can usually withdraw cash from these accounts when you want to, so you're free to switch.

If you are thinking of switching...

Whatever rate you're on currently, it may be worth waiting a few days to see if best-buy rates rise in response to the base rate before switching. These are our current top picks, but they could change at any time – for a full round-up, see our daily-updated 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 1.4% with a one-year fix. Union Bank of India pays the top one-year fixed rate of 1.4%, and its account can be opened online with £1,000 or more.

  • Up to 1.62% with a two-year fix. Charter Savings Bank pays the top two-year fixed rate of 1.62%, and its account can be opened online with £5,000 or more.

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