On the 1st February 2024, The Bank of England announced that the base rate will remain at 5.25%
What is a base rate?
The Bank of England charges banks and lenders interest when they borrow money from them. This interest is known as the base rate, or bank rate. This rate directly influences the interest charged by banks and lenders to individuals borrowing money, as the interest rate charged by banks and lenders for personal loans will always be higher than the base rate.
What is the base rate currently?
As of 1st February 2024, the base rate in the UK stayed at 5.25%. This is the now the fourth time in a row the base rate has remained unchanged. However, the base rate is still the highest it has been since 2008.
What does this mean for you?
The Bank of England uses the bank rate to encourage or discourage spending, depending on the state of the economy. A higher base rate means borrowing becomes more expensive and the interest on loans and mortgages increases, meaning they are harder to get. Lower base rates, however, are used to encourage spending as borrowing becomes cheaper.
There is an advantage of a higher base rate, because interest-based saving accounts earn a higher rate of interest, you’ll earn more on the money you can save.
What does this mean for your mortgage?
For those who are trying to get a mortgage or are on a fixed-rate mortgage due to end soon, a higher base rate can be worrying. However, with the base rate holding, it can bring more certainty for mortgage lenders, and could mean better mortgage rates.
If you are on a tracker or variable mortgage, an unchanged base rate means that your monthly repayments are likely to be unaffected and stay the same.
If your fixed-rate mortgage is coming to an end, be sure to look into whether you should remortgage, and do so before your contract comes to an end. It may also be beneficial to look at moving to a mortgage type which has more stability, just in case of future rises. It’s always best to speak to a financial advisor for advice specific to your circumstances, as they will be able to provide you with all your options. When it comes to remortgaging, you will often need a conveyancer to act on your behalf. Use our online calculator to get a personalised remortgage quote in minutes.
It’s important to learn about the different types of mortgages on offer, to work out which is best suited for you.
On the 14th December 2023, the Bank of England held the base rate at 5.25% for the third time, following an increase from 5% on 3rd August 2023.