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Bank of England increases base rate to 2.25% – what the rise means for your mortgage and savings

Bank of England increases base rate to 2.25%

The Bank of England has increased the base rate from 1.75% to 2.25% – the highest it has been in 14 years. This rate is used by the central bank to charge other banks and lenders when they borrow money – and so it influences what borrowers pay and what savers earn.

It's the seventh time in quick succession that the Bank has increased rates after it first lifted them to 0.25% from 0.1% in December last year. 

The increase follows predictions from the Bank of England that inflation could hit just under 11% over the next few months. This measure of how much prices rise stood at 8.6% in the 12 months to August, according to the most recent figures from the Office for National Statistics.

Base rate rises will affect most mortgages unless they're fixed. If you have a mortgage and want to check what action your bank or building society is taking in response to the rise, see our mortgage providers table below. If you're a saver, we'll also be adding in responses from savings providers as we get them.

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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 £23 increase in your monthly payments per £100,000 of 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 STANDARD VARIABLE RATE MORTGAGES
Bank of Ireland TBC TBC
Bank of Scotland TBC TBC
Barclays Under review Under review. Currently 5.74%
Clydesdale Up 0.5 percentage points from customer's next payment date Under review. Currently 5.49%
Co-op Bank TBC TBC
Cynergy Bank TBC TBC
Coventry Building Society Up 0.5 percentage points from 1 Nov Under review. Currently 4.89%
First Direct  Up 0.5 percentage points from 22 Sep Under review. Currently 4.54%
Halifax TBC TBC
HSBC Up 0.5 percentage points from 22 Sep Under review. Currently 5.04%
Leeds Building Society Up 0.5 percentage points from 22 Sep No change. Currently 5.99%
Lloyds Bank TBC TBC
Metro Bank Up 0.5 percentage points from customer's next payment date Under review. Currently 5.25%
Nationwide
Up 0.5 percentage points from 1 Nov
Under review. Currently 5.24%
NatWest TBC TBC
Newcastle Building Society Up 0.5 percentage points within 30 days of base rate announcement Up from 3.96% to 4.91% from 1 Oct
One Savings Bank TBC TBC
Post Office

TBC

TBC
Principality Building Society TBC TBC
RBS TBC TBC
Sainsbury's TBC TBC
Santander Up 0.5 percentage points from 1 Nov Up from 5.49% to 5.99% from 1 Oct
Skipton Building Society

Up 0.5 percentage points from 6 Oct

Under review. Currently 4.89%
TSB Up 0.5 percentage points from 15 Oct Under review. Currently 3.75%
Ulster Bank TBC TBC
Virgin Money Up 0.5 percentage points from 1 Nov Under review. Currently 5.49% (5.24% if you've had a Virgin Money mortgage for 7+ years)
West Brom Building Society No tracker mortgages Under review. Currently 5.24%
Yorkshire Bank

Up 0.5 percentage points from customer's next payment date

Under review. Currently 5.49%
Yorkshire Building Society

Up 0.5 percentage points from 9 Oct

Under review. Currently 5.39%

Last updated 26 September 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 we've included any responses that we've received below:

  • West Brom Building Society will increase rates by 0.5 percentage points on its savings tracker accounts from Wednesday 28 September, and is currently reviewing its variable rates.

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 3.6% on a one-year fix. Monument Bank pays the top one-year fixed rate of 3.6% but you'll need at least £25,000 to open an account. If you have less to save, Charter Savings Bank allows you to open an account with a minimum of £5,000 and pays 3.55%, while app-only Atom Bank lets you open an account with just £50 and pays 3.45%
  • Up to 4.01% on a two-year fix. SmartSave pays the top rate of 4.01% but you'll need a minimum of £10,000 to start. If you've got less to save, Atom Bank's 4% two-year fix can be opened with just £50.

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