The Bank of England (BoE) has increased the base rate by 1.75 percent, as forecast, hitting the highest rate since the Global Financial Crisis of 2007-2008, a period of extreme stress in financial markets and economic systems.
Our team at MortgagesRM are encouraging all homeowners to shop around for the best fixed-rate mortgage deal to protect against further rises in costs. Get the best remortgage deal today!
Base Rates continue their astronomical rise
The increase was widely anticipated, and is now the sixth consecutive rise from the record low rate of 0.1 percent in December 2021.
The base rate was higher in December 2008, when it was 2 percent, but then fell to 1.5 percent at the beginning of January. The last time that the BoE raised rates by 0.5 percent was in 1995 when it was increased from 6.13 percent during December 1994. It was then raised to 6.63 percent in February 1995.
When will the economic recession hit?
The BoE has forecast an economic recession that could last for more than a year, with the CPI inflation rate expected to reach 13% by the end 2022.
The warning is issued as the BoE has lowered its growth forecast, predicting the economy to slide into recession in the period between October and December 2022.
The central bank stated that it anticipates the recession to continue until 2023. The bank expects that output will fall by 2.1 percent from peak-to-trough throughout this recession. This fall is similar to the recession in the 1990s but less severe than the 2008 crash.
How will increased base rates impact people trying to get a mortgage?
First-time buyers looking to make it onto the ladder are facing the cost of a mortgage which is 20% more than at the beginning of the year because of increasing interest rates and higher house prices. This is as long as they’ve been able to save a sufficient amount of money to secure a deposit.
Prior to the increase in base rates the average monthly mortgage payment was £976 per month. This compares to £813 monthly in the beginning of January, which is a 20% increase since the beginning of this year. The 0.5 percent hike could increase this to £1,030, if the pricing is passed to lenders.
You can avoid being hit by switching to a fixed-rate mortgage deal
The bank recognised that the rates of lending on new mortgages with fixed rates were rising and that the transition of mortgages with risk-free rates was similar to the situation witnessed in the 2008 financial crisis in the world.
There are over 850,000 people living in the UK who are either on a variable or Tracker rate. This means that their mortgage payments will be increasing in accordance with base rates. People who have variable rates will notice the change almost instantly.
If you switch to a fixed-rate mortgage deal now, you can avoid the huge price hike that will come to those with variable rate mortgage products.
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At MortgagesRM, we are experts at sourcing the very best remortgage deals for our clients. We charge no fees to the people who come to us for mortgage advice, we take a fixed fee from the bank. This means that our only motivation is to find you the very best deal out there – get in touch today and let us help you save money today.
