Base rate up again

The ever-rising cost of living means inflation could climb as high as 8% over the next six months. To try and get it under control, the Bank of England’s Monetary Policy Committee (MPC) has now voted by 8 to 1 to raise the UK’s base rate to 0.75%. At the same time, they warned that further rises "might be appropriate in the coming months".

In an historical context, 0.75% is still a very low figure and the 0.25% rise will only add around £26 a month to the average tracker mortgage or £16 to the average variable rate one. The inflationary climate, though, is making lenders behave more cautiously and, even before the announcement, mortgage rates had already been on the increase. Since October of last year, the average two-year fixed-rate mortgage has gone up from 0.89% to 1.89% and the average five-year rate has gone up from 1.05% to 1.97%. The pace of change is such that many of the best deals are being pulled after just a few weeks, to then be replaced with more expensive ones. At the same time, the number of available mortgage products has shrunk by around 10% (500). And, over last week, in anticipation of the Bank of England's base rate move, many of the best 5-year fixed-rate mortgages crept over 2.1%. The rises have led to many borrowers rushing to fix their mortgages, often electing to pay early exit fees rather than missing out on the best deals.