What the Bank of England rate rise means for your mortgage

HOMEOWNERS could be given some relief from punishing hikes following today’s interest rate rise – in an unpredicted move.

Despite the Bank of England increasing the base rate of interest by 0.75 percentage points – the biggest hike since 1989 – lenders may now cut the cost of mortgages for some customers.

The Bank of England also warned the UK could be on course for its longest recession since reliable records began a century ago.

Today, the Bank of England revised its predictions on how much interest rates will rise in the future.

Lenders price mortgages based on what financial markets predict interest rates will be in the next few years, rather than what the current interest rate is.

Previously, the BoE said that interest rates would rise to 6% next year but today it said they would hit a maximum of 4.6%,

What the rate rise means for mortgages

Today’s move is unprecedented and we are in uncharted waters.

Usually, banks will hike mortgage rates when interest rates go up.

How you will be affected depends on what mortgage you have.

Anyone on a tracker mortgage will be the first to feel the effects of the increase.

And around 800,000 homeowners on a tracker mortgage directly linked to the base rate should see an immediate rise. Barclays has confirmed to The Sun that existing customers will pay more from tomorrow.

These mortgages are linked to the Bank’s base rate – so when it goes up, so do your monthly repayments.

SVRs are not directly connected to the base rate like a tracker, but high street banks usually increase their SVR after a BoE rate hike.

However, this evening Barclays became the first bank to announce a cut to its SVR on December 1, meaning its customers will pay less.

While those locked into fixed-rate deals are protected for now, higher interest rates mean they face a huge jump when they come to remortgage.

Around 2.2million borrowers are due to come to the end of a deal that they fixed when the base rate was at a historic low of 0.1%.

On a fixed deal you lock in a rate for a certain period of time which keeps payments the same.

But as the Bank of England now expects interest rates to peak at 4.5% – lower than the previous 6% experts had warned of – it means they may face a less severe rise than previously feared.

Some fixed mortgage deals have had their rates reduced in recent days. Barclays confirmed to The Sun that there was no change to fixed rates.

The Sun reported that a number of lenders started cutting their deals last week.