The Bank of England's base rate is a crucial factor in the UK's financial system, influencing borrowing costs, savings rates, and economic stability. But what does it mean for your mortgage and Understanding UK Base Rates?
What is the Base Rate?
The base rate is the interest rate the Bank of England charges banks and lenders when they borrow money. This, in turn, affects the interest rates that banks offer to consumers on mortgages, loans, and savings.
How Does It Impact Your Mortgage?
Tracker Mortgages – If you have a tracker mortgage, your interest rate moves directly in line with the base rate. When the base rate rises, your monthly payments increase; if it falls, your payments go down.
Standard Variable Rate (SVR) Mortgages – Lenders set their own SVRs, but these typically follow base rate changes. If the base rate rises, your lender may increase their SVR, making your mortgage more expensive.
Fixed-Rate Mortgages – If you're on a fixed-rate deal, your payments remain the same until your term ends. However, when you remortgage, you may find higher rates if the base rate has increased.
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