bank of england inflation base rate

Bank of England base rate hits 4.25% but mortgage rates are down

The Bank of England has increased its base rate once more, and anyone considering a new mortgage or remortgage is being urged to act quickly.

As most in the industry had predicted, the Bank of England confirmed an 11th consecutive base rate rise from 4% to 4.25%, while also raising its forecast for global growth. It also expects inflation to fall sharply over the next few months, to a lower level than it had anticipated in the Monetary Policy Committee’s February Report.

For anyone with an interest in the property industry, whether a homeowner, a first-time buyer or a property investor, the mortgage market has seen some big changes in recent months, since the base rate first began to rise last year.

However, the latest data from Moneyfacts shows a more positive picture than many had expected linked to the Bank of England’s actions, with fixed rate products actually falling since the end of last year, bringing borrowing costs down from the heights they had reached.

But for those looking at purchasing a property or remortgaging soon, many in the industry are advising fast action – particularly for anyone who is currently sitting on their lender’s standard variable rate, which has continued to climb.

Keep an eye on the market

As of the start of this month, the average five-year fixed rate mortgage was 5%, down from 5.20% in February, while the average 10-year fixed rate mortgage fell from 5.34% to 4.98%. This is good news for borrowers hoping to lock in for some long-term stability.

Two-year fixed rates have also come down, according to Moneyfacts, from 5.44% last month to 5.32% this month. On average, this means that fixed term mortgage rates in general are now at a six-month low, despite the Bank of England base rate going up.

However, the average standard variable rate (SVR) now stands at 7.12%, up from 6.84% in February, and Rachel Springall, finance expert at, points out that opting for a fixed rate now is likely to be the most sensible option for most people.

“Those borrowers who wish to refinance might be pleased to see that fixed rate mortgages have fallen since the tail end of 2022, and that it is currently cheaper on average to lock into a five-year fixed rate over a two-year fixed deal.

“The incentive to fix is clear from the continued rise to the average Standard Variable Rate (SVR), which is now above 7%, a level not breached since 2008. A rate rise of 0.25% on the current average SVR of 7.12% would add approximately £772* onto total repayments over two years.”

She also advises keeping a close eye on the UK mortgage market for any shifts, as well as the housing sector in general. It is not known whether the Bank of England will increase rates for a 13th time at the next MPC meeting.

“Affordability may well be the key challenge for borrowers struggling with the cost of living crisis, as interest rates are higher than prospective buyers, or those looking to remortgage, were perhaps anticipating.

“Whether now is the right time to get a mortgage will entirely depend on someone’s individual circumstances, so seeking advice is vital.

“In the meantime, it would be wise for borrowers to keep a close eye on the mortgage market, housing supply and house prices, particularly for new buyers who are a critical part of keeping the market moving.”

Response to Bank of England rate rise

The recent base rate rise prompted a similar response from Paula Higgins at HomeOwner’s Alliance, who pointed out that there is no certainty over where mortgage rates are going to go in relation to the Bank of England’s rate as well as other external factors.

“If you’re looking for a mortgage, it’s more important than ever to move quickly because we’re continuing to see the cheapest rates pulled from the market. The best mortgage rates on two-year and three-year fixes today are up compared to what was available at the start of March 2023.

“And while the best rate available on a five-year fix has nudged down compared to the start of the month if you’re remortgaging, no one knows how long any rates on offer today will be available for.

“Lenders are eyeballing each other to see who will act first in offering the best new deal. As they test the waters, we’ve seen new cheap rates on offer only to have them quickly pulled again by the lenders, so homeowners on the lookout for the best deal need to act fast.”

Meanwhile, Nathan Emerson, chief executive for Propertymark, the professional body for property agents, said the latest Bank of England increase could present some challenges.

“For some current homeowners, the cost to remortgage will mean finding an extra £200 to £300 a month on average, whereas for many of those entering the property market, they will need to re-imagine their budgets and adjust their affordability.

“Previous increases are returning us back to a more sensible market with supply and demand levels evening out. This in turn has started to soften house prices and we would expect this trend to continue to counteract the unsustainable transaction levels and unachievable house price increases seen previously.”

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