Today, Thursday 3 August 2023, the Bank of England base rate increased yet again. It rose by 0.25 percentage points, now standing at 5.25% – a 15-year high. It is the 14th time the central bank has raised rates after it first lifted them to 0.25% from 0.1% in December 2021.
The gradual increase seems to be having the desired effect, however, as inflation dropped in June to its lowest level in over 12 months (7.9%, down from 8.7%). It is intended to continue falling significantly. Current estimates predict it as low as 5% by the end of 2023.
The base rate is what the central bank uses to charge other banks and lenders when they borrow money. Therefore, it influences what borrowers pay and what savers earn.
Will there be further rises?
The base rate is now expected to peak at 5.75%, which is a lower estimate than the previously touted 6%. This is because the inflation is already dipping, so there is less pressure for the BoE to increase it as much.
Bank Governor Andrew Bailey said: “Inflation is falling and that’s good news. We know that inflation hits the least well off the hardest and we need to make absolutely sure that it falls all the way back to the 2% target. That’s why we’ve raised rates to 5.25% today.”
What does this mean for me as a homeowner?
Some fixed-rate mortgage offers have now fallen for the first time since May. This is good news for prospective homeowners, and is expected to continue through the rest of the year.
For those on tracker mortgages, your costs will go up by around £14 per month for every £100,000 you owe on your mortgage. Current estimates predict an extra £220 a month on average for those remortgaging. Those on Standard Variable Rate mortgages (SVRs) are likely to see a greater increase.
What impact will this have on my savings?
In general, savings benefit from the base rate rises. However, some high street banks have been slow to pass on the increases to customers.
Savings rates are unlikely to rise much further as the base rate increases slow down. Some of the best fixed-rate deals have already been pulled from the market, so if this is something you were considering doing then now is the time to fix. Some banks are still offering fixed savings rates as high as 6.05%.
Speak to us for guidance before you make any decisions on this front.
As always, we strongly advise you to speak to your financial planner before making any decisions about your money. We will discuss your concerns with you and look at the options, ensuring that it is consistent with your financial plan and goals.
If you would like to further discuss your finances in relation to the latest base rate rise, please do get in touch. Either call us on 02920 782330 or email us at email@example.com. Our lines are manned Monday-Thursday, as we operate a four-day working week.