Two days ago, on August 2nd, 2018 the Bank of England raised the interest rate by 0.25% to 0.75%. Residential and commercial mortgage holders not on a fixed rate should now see their mortgage repayments rise.
The Royal Bank of Scotland, NatWest and Ulster Bank raised their tracker mortgage rates by 0.25% on the same day that the interest rate rise was announced by the Bank’s Monetary Policy Committee.
The Bank of England base rate is used as a guide to calculate mortgage interest rates, but lenders are not forced to raise their rates when the Bank of England does. A typical mortgage for £150,000 on a 25-year term will have to pay about £264 a year more. Commercial mortgage holders with much larger mortgages will pay considerably more. The bridging loan market is a very competitive one, so it could be that some lenders do not increase their rates in the short term.
The governor of the Bank of England, Mark Carney has hinted that the rates may rise again within the next few months. Borrowers could change their mortgage to a fixed rate one to avoid further rate increases in the next year or two. A mortgage broker will be able to advise on whether this is a suitable strategy for the individual mortgage holder.
Even after the latest rise, interest rates are low when compared to the 2009 5% rate shortly after the financial crisis. In 1990 the bank rate was nearly 15% at 14.875%.