Earlier today, the Bank of England raised the base rate from 0.5% to 0.75%.
This is the second increase in the base rate since November last year, and it means that those with mortgages and other debts are likely to see costs go up.
On the flipside, if you’re a saver, the good news is there should be some upward movement in savings rates, so you’ll be able to earn more for your money.
Let’s take a closer look at the impact of the rate increase…
Base Rate Calculator
Find out how much your mortgage payments and savings will be affected by the change in the Bank of England base rate.
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Your base rate results
As your rates are fixed, the payments or interest won't change in the short term.
However, check when your fixed term ends, and be prepared to switch to the best deals available. You can compare mortgage deals or get fee-free mortgage advice at any time.
Your base rate results
Good news! Overall, you are likely to be around £ better off over the next year as a result of the Bank of England's decision to its base rate by %
Unfortunately, it looks like the Bank of England's decision to its base rate by % could leave you
£ worse off over the next year
The change in base rate doesn't actually mean anything for you. It's not going to leave you any better or worse off.
Your mortgage costs will not over the following year as your mortgage is fixed
Your mortgage costs could by around £ per year, with new monthly payments of £
The interest you earn from your savings will not change over the following year as your interest rate is fixed
You could earn around £ in savings interest per year.You can earn up to £1000 a year in savings interest without paying tax (£500 if you're a higher rate taxpayer). If you earn more than that, please note that the excess will be subject to your normal income tax rate.
Your savings won't be affected by the change in the base rate.
So what next?
You may be able to increase the amount of interest you earn on your savings. Take a look at the Top Savings Accounts.
As your mortgage isn't fixed, it's likely your monthly payments will decrease. It's also likely that you're free to move to a different rate or even change lender to lock in a lower rate. You can compare mortgage deals or get fee-free mortgage advice.
Your rates are fixed, so while you won't be affected by recent changes to the base rate, it doesn't mean you can't save money.
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Fixed rate mortgages
If you’re on a fixed rate mortgage, you can breathe a sigh of relief for now, as your monthly payments won’t change, despite the base rate rise.
However, with further increases expected, it’s likely that very cheap mortgage deals could soon be a thing of the past. And that means that once your fixed rate deal ends, you may have to remortgage onto a higher rate.
If you have a tracker mortgage, where the rate tracks the Bank of England base rate plus a stated percentage, your lender is likely to be in touch shortly to let you know that your payments will be increasing from next month or soon after.
So if, for example, your tracker deal tracks the base rate plus another 2%, before today’s rate increase you’d have been paying 2.50%. Once the base rate increase has been factored in, you’ll be paying 2.75%.
Variable rate mortgages
Variable rate mortgages, including standard variable rates (the rate your mortgage reverts to once your existing deal ends), can change at any time, no matter what happens to the Bank of England base rate.
But given the base rate has now gone up, your lender is likely to be in touch in the coming weeks to inform you of an increase to your monthly repayments.
Personal loan rates have remained at record low levels in recent months. In fact, if you’re looking to borrow between £7,500 and £15,000, it’s possible to get rates as low as 2.7% APR representative.
But thanks to today’s base rate increase (and the expectation that more could follow), rates this low could soon come to an end.
If you already have a personal loan, however, you’re likely to be on a fixed rate of interest, so your payments won’t change.
If, on the other hand, you’re on a variable rate, it’s likely your payments will increase, but your lender should be in touch before any changes take effect.
Annual percentage rates (APRs) on credit cards have remained at high levels, despite the low base rate.
But the good news is, there are still plenty of lengthy low introductory rates available on both balance transfer and purchase credit cards. Just be aware that these deals are getting shorter and this is likely to continue being the case.
Always remember to clear your balance before the introductory offer ends and a high rate of interest kicks in.
Record low interest rates have made it virtually impossible for savers to get a decent return on their money, so today’s base rate increase will no doubt have been welcomed by many.
However, while some banks and building societies may start to push up their savings rates – as, indeed, some already have following November’s rate rise – they are under no obligation to do so, so you may see no change at all.
Variable rate savings accounts
If you have an easy access account or ISA, which allows you to get hold of your money when you need it, your savings rate will usually be variable. This means your bank may get in touch over the coming weeks to inform you of an increase to your savings rate.
But if that doesn’t happen, there’s nothing stopping you from looking around for a better deal and switching to something more competitive anyway.
Fixed rate savings accounts
If you have a fixed rate savings account or ISA, your interest rate is locked in for a fixed term and will remain the same, despite the base rate rise.
Should you want to move to a more competitive deal before your fixed rate deal ends, it’s likely you’ll have to pay a penalty, and you’ll probably be better off waiting for your fixed term to end before switching.
If you’re currently looking for a fixed rate savings account, be wary of fixing for too long as interest rates are expected to continue to rise and you could find yourself stuck on an uncompetitive rate.