The Bank of England (BoE) interest rate* is also known as the base rate. It directly affects your mortgage if you have a variable or tracker rate mortgage. Those with fixed rate mortgages need to consider the Base Rate when their mortgage term is coming to an end.
Variable Rate Mortgage
If you have a variable rate mortgage, your interest rate is linked to the Bank of England base rate. When the Bank of England raises/lowers the base rate, your mortgage interest rate typically adjusts by a similar amount. Whilst the variable rate is linked to the Bank of England rate, the lender is able to adjust the mortgage rate as they choose.
Tracker Mortgage
Similar to variable rate mortgages, tracker mortgages are linked to the Bank of England base rate. The interest rate on a tracker mortgage “tracks” the movements of the base rate. This is usually by a set percentage above or below the base rate. For example, a tracker mortgage may track the base rate plus 1%. If the base rate increases by 0.25%, your mortgage rate would also go up by 0.25% plus the additional 1%.
Fixed Rate Mortgage
With fixed rate mortgages, your interest rate remains the same for the duration of the fixed term. This is regardless of changes in the Bank of England base rate. Therefore, fluctuations in the base rate do not affect your mortgage payments during the fixed rate period. However, once the fixed term ends, you may choose to switch to a variable rate mortgage. At this point, changes in the base rate would have an impact. Some banks and building societies will let you lock into a new rate up to six months before your old one expires. It is therefore worth monitoring when you’re allowed to this, in case it’s beneficial to switch deals early.
Overall, changes in the Bank of England interest rate can have a significant impact on your mortgage payments. It’s important to stay informed about Bank of England rate announcements and their potential impact on your mortgage. At Bell Mortgage Solutions, we will help you consider your options going forward. This can include fixing your mortgage rate for a certain period or exploring remortgaging opportunities. We will provide you with personalised guidance on how to navigate interest rate fluctuations and manage your mortgage effectively. Contact us for an initial consultation.
* Please be aware that by clicking onto the above link you are leaving the Bell Mortgage Solutions website. Please note that neither Bell Mortgage Solutions nor PRIMIS are responsible for the accuracy of the information contained within the linked site accessible from this page.
Please note: Your home may be repossessed if you do not keep up repayments on your mortgage.
The information contained within was correct at the time of publication but is subject to change.
Bell Mortgage Solutions 