Bank of England Base Rate

Understanding the base rate and its impact on your mortgage.

The Bank of England bank rate, also known as base rate is set by The Bank of England’s Monetary Policy Committee (MPC), who usually meet every 6 weeks to review this rate. You can find the current base rate here.

I’m sure we’ve all heard or seen the term "bank rate" or “base rate” lots over the last year or so, but we wanted to tell you more about what it is and how it impacts us all.

What is base rate?

Base rate is the most important interest rate in the UK, as it’s the rate the Bank of England charges banks and building societies to borrow money from them, including us. When they increase or decrease the base rate, commercial banks and building societies will often pass this change (all or some of it) on to their borrowers and savers. You can find out how the Bank of England decides the base rate here.

Why does the base rate change?

The MPC looks at the current state of the UK economy, including the rate of inflation, and tries to influence consumer spending by increasing or decreasing the base rate.

When the base rate goes up, borrowing (loans/mortgages) becomes more expensive and discourages consumer spending in other areas, which in turn should bring prices down. On the flip side, savings rates also go up, encouraging consumers to save.

When the base rate goes down, the interest rates on borrowing (loans/mortgages) also reduces. It's to encourage consumer spending and borrowing, as your interest payments are lower. Interest rates will also be lower on saving accounts, so therefore you'll make less interest on your savings.

More about inflation

Inflation is the measure of how much goods and services (such as fuel, food and televisions) have increased over a period of time.

For example: If a loaf of bread cost £1 last year and it now costs £1.06, the price has risen by 6%

There are a few reasons why the rate of inflation increases, such as a shortage of products and/or services. For example, the conflict in Ukraine impacted grain production and export levels along with the supply of gas and oil from Russia, making it more expensive to fill up cars and heat homes.

You can find out more on inflation, including the current rate here.

How a rate change affects your mortgage

If you have a variable rate mortgage (this includes tracker and discounted rate mortgages) your mortgage rate could go up or down and it's likely that it will be affected by a change in the Base Rate. If your mortgage rate is changing, we’ll write to you before your next payment is due, letting you know your new rate and what your new monthly payment will be.

If you have a fixed rate mortgage, your rate and payments will not change during the fixed rate period. If you don't switch your mortgage deal when your fixed rate ends, you will revert to our standard variable rate or BTL variable rate mortgage.

What can I do if my payments are changing?

If you’re on a variable or discounted rate mortgage and you’d like the security of fixed mortgage payments, you may be able to switch to a fixed rate mortgage with us. Click here for more information on how to switch your mortgage, including important things to consider. You can book an appointment to speak with one of our Mortgage Team or call us on 0345 601 3344 and we can arrange an appointment for you.

If you’re worried about making your payments please contact us as soon as possible, as we can talk through the options available to you. You can find more information on how we can help you here. It’s important not to delay seeking advice; it’s widely available and free of charge from organisations like Money Helper.

Base Rate FAQs

What is your Standard Variable Rate?

You can view all of our current rates, including our Standard Variable Rate and BTL Variable Rate here

 

When will you be changing your rates?

Mortgage rates which are linked to the Bank of England Base Rate will change within one month following the announcement of the new base rate.

 

When will you let me know what my new repayment amount will be?

If your mortgage is affected by the change in rates, you'll receive a letter once our new rates are confirmed to advise you of your new monthly payment.

 

I have a mortgage payment holiday arrangement in place – will this still stand?

If you have an agreed mortgage payment holiday in place this will continue and we’ll let you know of any changes to your repayments before your arrangement comes to an end.

 

I’ve recently applied for a mortgage with The Cambridge – will this affect my application?

If you’ve applied for a mortgage deal that is linked to our Standard Variable Rate or BTL Variable Rate, we’ll write to you to confirm your new rate and the amount you will repay each month.

 

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE