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Bank of England increases base rate to 1.75% – what the rise means for your mortgage and savings

Bank of England increases base rate to 1.75% – what the rise means for your mortgage and savings

The Bank of England has increased the base rate to 1.75% from 1.25% - the biggest single rise in 27 years. This 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 rise follows predictions from the Bank of England that inflation could hit just above 13% later this year. Inflation stood at 8.2% in the 12 months to June, according to the most recent figures from the Office for National Statistics.

The base rate rise means it is the sixth time in quick succession that the central bank has increased rates after it first lifted them to 0.25% from 0.1% in December last year. 

Base rate rises will affect most mortgages unless they're fixed. If you have a mortgage and want to check what your bank or building society is doing in response to the rise see our table below. If you're a saver take a look at our section on savings providers.

I have a mortgage. What happens now?

The vast majority of mortgage holders in the UK have a fixed-rate mortgage, so for most, nothing will change. The key points for mortgage holders are:

  • Fixes are fixed. But sort a new deal soon 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%.

  • On a tracker mortgage? Rates will increase. As the name suggests, these 'track' the base rate, so mortgage costs will go up. In general, this latest rise means about a £27 increase in your monthly payments on a £100,000 mortgage.

What should I do with my mortgage?

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 that 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.

Is your lender raising mortgage rates? 

PROVIDER CHANGE TO TRACKER MORTGAGES CHANGE TO SVR MORTGAGES (standard variable rate)
Bank of Ireland TBC TBC
Bank of Scotland TBC TBC
Barclays Up 0.5 percentage points from 1 Sep Currently 4.74% - up 0.5 percentage points from 1 Sep
Clydesdale Up 0.5 percentage points from customer's next payment date Currently 5.49% - under review
Co-op Bank Up 0.5 percentage points from 1 Sep Currently 5.49% - no change
Cynergy Bank TBC TBC
Coventry BS Up 0.5 percentage points from 1 Sep Currently 4.89% - no change
First Direct  Up 0.5 percentage points from 4 Aug Currently 4.54% - under review
Halifax TBC TBC
HSBC Up 0.5 percentage points from 5 Aug Currently 4.54% - under review
Leeds BS TBC TBC
Lloyds Bank TBC TBC
Metro Bank Up 0.5 percentage points from TBC Currently 4.50% - under review
Nationwide
Up 0.5 percentage points from 1 Sep
Currently 4.74% for mortgages taken out on or after 30 April 2009 or 3.25% for mortgages taken out before this - under review
NatWest TBC TBC
Newcastle BS Up 0.5 percentage points from 18 Aug Currently 3.96% - under review
One Savings Bank TBC TBC
Post Office

TBC

TBC
Principality BS TBC TBC
RBS TBC TBC
Sainsbury's Up 0.5 percentage points from TBD Currently 4.59% - under review
Santander Up 0.5 percentage points from 3 Sep Currently 5.49% - up 0.5 percentage points from 1 Sep
Skipton BS

Under review

Currently 4.89% - under review
TSB TBC TBC
Ulster Bank TBC TBC
Virgin Money Up 0.5 percentage points from 1 Oct Currently 5.49% (5.24% if you've had a Virgin Money mortgage for 7 plus years) - under review
West Brom BS Up 0.5 percentage points from 1 Sep Currently 4.59% - under review
Yorkshire Bank Up 0.5 percentage points from customer's next payment date Currently 5.49% - under review
Yorkshire BS Up 0.5 percentage points from 4 Sep Currently 4.99% - under review

Last updated 4 August 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 accounts. In general, savers benefit from base rate rises – though some high-street banks can be slow to pass increases on to customers, and new best-buy deals don't always emerge straightaway. We've asked all the main providers what their plans are and so far two providers have responded:

  • Coventry BS will increase rates from 1 September, by how much is yet to be confirmed.
  • Newcastle BS will increase rates on its savings products by 0.5 percentage points from 25 August.
  • Santander will increase rates on its Rate for Life and Good for Life products by 0.5 percentage points from 2 September

Savers should wait a few days before switching

Whatever rate you're on currently, it may be worth waiting a few days to see if best-buy rates improve before switching – for a full round-up, see our daily-updated Top savings guide. Our current top picks, which could change at any time, are:

  • Up to 1.71% on easy accessVirgin Money's M Plus is offering 1.71% on up to £25,000, starting with just £1. Yet to get it, you'll need to open (though needn't switch to) its bank account, which means a full credit check will go on your credit file – though the debit card that comes with it is top for overseas use.
  • Up to 2.85% on a one-year fix. OakNorth Bank pays the top rate of 2.85% (minimum £1 deposit) or, if you want monthly interest payments, Charter Savings Bank offers 2.83% (minimum £5,000 deposit).
  • Up to 3.15% on a two-year fix. Monument Bank pays the top rate of 3.15%, but only if you have a minimum of £25,000 to deposit. If you're saving a smaller amount, Shawbrook Bank pays the next best rate of 3.12% with a £1,000 minimum deposit and offers monthly interest payments.

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