The Bank of England has increased the base rate to 1% in an attempt to curb inflation. It’s the fourth increase since the start of December, when the base rate was at 0.1%. Here, in numbers, is what it could mean for your finances:
2009
The last time the Bank base rate was 1%. It was cut from 1.5% to 1% in February that year as the credit crunch took hold. The next month it was reduced to 0.5%, where it stayed until August 2016, and it was then cut to offset the impact of the Brexit vote on the economy. UK borrowers have lived through 13 years of very low interest rates.
7%
The current rate of inflation. One of the Bank of England’s jobs is to hit a 2% inflation target. It expects inflation to increase to 10% before the end of the year, despite its efforts to control it by raising interest rates.
1,092,000
Number of borrowers on a standard variable rate mortgage. These home loans have an interest rate set by the bank or building society. Some are explicitly linked to the base rate so will automatically go up in line with it, but others are set at the lender’s discretion.
£504
How much more a £200,000 variable rate mortgage will cost each year as a result of today’s increase, according to figures from UK Finance. It says a 25 basis points rise in rates adds £42 a month to repayments.
4.71%
The average standard variable rate charged by UK mortgage lenders, according to Moneyfacts. In December 2021 this stood at 4.4%. It has not risen by as much as the base rate because not all lenders have moved in line with the base rate.
841,000
Number of borrowers on a tracker mortgage. These have an interest rate linked to the base rate so will definitely increase in cost – probably from next month. UK Finance says the average balance on a tracker mortgage is £121,034.
£25.22
How much more a month the average tracker mortgage will cost as a result of the latest increase.
75%
Proportion of the mortgage market on fixed-rate mortgages. These 6.75m borrowers won’t be affected by the increase in the base rate now. They could face higher borrowing costs when they come to the end of their deal and need to remortgage.
18%
Proportion of online searches by people looking to remortgage that related to 10-year fixed-rate mortgages in March this year, according to comparison website Moneysupermarket. A year earlier the figure was 2.9%.
2.23%
Lowest rate available on a 10-year fixed-rate mortgage currently. Available from Lloyds bank to people with a deposit of at least 40%.
£2.50
Extra interest earned on £1,000 of savings – although do not assume the rate rise will be passed on to you, as in most cases it is up to the savings provider to decide whether to increase what it pays out. If your money is in a fixed-rate savings bond, you will definitely not see a rise in returns.
£25
Extra interest earned on £10,000 of savings if the whole rate rise is passed on by your bank or building society.
1.49%
Highest rate currently available on an easy access account, according to Moneyfacts. This is payable at Chase and is available on savings of up to £250,000. Despite being table-topping it’s well below the current rate of inflation, so the value of your money is being eroded over time.
2.75%
Highest savings rate available to UK savers currently, according to Moneyfacts. It’s on a five-year fixed bond and based on savings of £10,000.
3%
Where the consultancy firm Capital Economics has predicted the base rate will be in 2023. It is forecasting a faster increase than many other commentators – the consensus among them is that it will hit 2% next year. The last time the base rate was at 3% was as the banking crisis was beginning to bite.
