The Bank of England base rate in 2022

Many mortgage customers will have seen interest rates go up as a result of the rising Bank of England base rate, which has gone up 8 times since December 2021.

Despite this, mortgage approvals have stayed fairly consistent with pre-pandemic levels.

Rise of tracker mortgages vs. fixed rate mortgages

The mortgage market has noticed a marked increase in applications for tracker mortgages since September.

In fact, 71.8% of all tracker mortgage submissions at Trussle in 2022 were submitted between October 1st and November 14th.* 

Tracker mortgages are linked directly to the BoE base rate and fluctuate according to whether the base rate goes up or down.

Tracker mortgages became a more affordable choice for many as fixed mortgage rates soared since the September mini-budget fallout.

As of 3 November 2022, the BoE base rate now sits at 3%. While it's still too soon to see the mortgage application impact, the 0.75% base rate increase may likely impact the popularity of tracker mortgage applications. 

*Our tracker mortgage submissions data is correct from November 2022.

What the Bank of England base rate increase means for first time buyers

First-time buyers will feel the impact of the increased Bank of England base rate. 

Buying a home is already difficult for many first-time buyers, so the rising interest rates and costs will not make this easier.

But, options available could make things easier for first-time buyers.

Tips for first-time buyers:

  • Save as much as possible for your deposit so that you can borrow less and get access to better mortgage rate options

  • Keep in mind the fees  attached to a mortgage deal

  • Consider different mortgage options, such as tracker mortgages

  • Speak to a mortgage broker and see if they can find a deal to suit your needs

What the Bank of England base rate increase means for buy to let mortgages and landlords

Like many mortgage customers, buy-to-let customers will see their mortgage costs rise in recent months.

Buy-to-let customers will be paying more each month unless they are already on a low fixed rate that is not due to expire in the next 6 months.

Rising interest means many landlords are increasing their tenants’ monthly rent accordingly, making renting more expensive. This will help landlords to make up for their rising monthly repayments, but it can put a strain on tenants. 

If you are a buy-to-let landlord with a fixed rate due to expire in the next 6 months, you will benefit from looking at mortgage rates before the end of your term. 

What the Bank of England base rate increase means for mortgage rates

If you have a variable rate or tracker mortgage, you will likely see your mortgage interest rate change when the base rate does.

If you are on a fixed-rate mortgage, you will not be affected when the base rate changes.

This graph shows how the base rate has impacted mortgage rates since 2012.

What the Bank of England base rate increase means for fixed mortgages

When you’re on a fixed-rate mortgage, your interest rate will stay the same until the end of your agreed fixed term. So, you will not see any change in the amount of interest you pay. 

This is good news if you’re already on a fixed-rate mortgage with a low-interest rate, as the increasing base rate will not affect your monthly repayments.

However, if your mortgage term is due to end in the next 6 months, now could be a good time to start considering your options for when you need to remortgage, as they will likely be higher than when you last fixed.

The average 2-year fixed rate increased to 6.46% on 13 October. This was the highest rate since 2008 and a huge jump from the usual average of around 2 or 3%.

What the Bank of England base rate increase means for tracker mortgages

We’ve found that since January 2022, 4.1% of Trussle customers’ mortgage applications have been for tracker mortgages. 

Significantly, 71.8% of all tracker mortgage applications have come in the 6 weeks following the mini budget in September 2022. This is because tracker rates are currently lower and more affordable than fixed-rate mortgages.

Are trackers a better option than a fixed rate

At first glance, getting a tracker mortgage may not seem like the best approach while interest rates continue to go up. But they could be a better choice than fixing your mortgage at a high rate for 2, 3, or 5 years.

According to MoneyFacts, the day after the base rate rose from 2.25% to 3%, the average 2-year tracker was around 3.85%. This is lower than the average 2-year fixed rate which stood at 6.46% at the time.

With fixed rates currently at around 6%, locking in at that rate for 2 or more years could end up being more expensive than a tracker. This could be the case even if the base rate and trackers continue to increase, as fixed rates may still be more costly.

What the Bank of England base rate increase means for variable rate mortgages

If you’re on a variable rate mortgage, you may have seen your mortgage repayments increase over the past year, due to the difficult financial climate.  

However, standard variable rates (SVRs) are not directly linked to the BofE base rate and are instead decided by the lender. 

If your mortgage repayments are becoming difficult to afford, you should consider speaking to a mortgage broker to find out what your options are.

When does the Bank of England base rate change?

The BofE base rate has recently increased approximately every 6 weeks and is often a response to fluctuations in the rate of inflation.

The next base rate change can be expected in December 2022.

Where to go from here

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