Base Rate Increase
The Bank of England (BoE) has increased the base rate level of interest to 5%, the 13th consecutive increase. The Monetary Policy Committee voted by a majority of 7-2 to increase the base rate from 4.5% to 5%, a larger increase than expected by the majority of the market in the lead up to the vote.
This is the highest base rate has been since 2008, and the largest rate increase since February this year, largely driven by higher than expected inflation data released on Wednesday.
Andrew Bailey, Governor of the Bank of England said “The MPC will do what is necessary to return inflation to the 2% target sustainably in the medium term.”
What Does This Mean?
This change will likely result in an increase in mortgage payments for millions of borrowers on variable rate mortgages as lenders react to the announcement. Those on fixed rate mortgages will be unaffected at this time, with payments remaining the same until their deal ends, however they may see an increase in their repayments when it comes to finding a new deal in the future.