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Everything you need to know about the Bank of England and interest rate rises
The Bank of England base rate impacts mortgage interest rates.
They’re important for anyone who has a mortgage or wants to get one.
Mortgage rates have already increased because of the base rate increase on 3 February, and are likely to continue to increase this year after the base rate has further been increased on 17th March 2022. Our Bank of England Base Rates Guide covers the latest updates.
The Bank of England base rate is currently 0.75%.
The base rate was increased from 0.50% to 0.75% on 17 March 2022 to try and control inflation.
The base rate was previously reduced to 0.1% on 19 March 2020 to help control the economic shock of coronavirus.
The bank reduced the base rate from 0.75% to 0.25% 1 week earlier on 11 March 2020.
0.75% is still quite a low interest rate, but the Bank of England has signalled that it will likely increase more this year, towards a target of 1.5%
The Bank of England base rate is an interest rate. It’s also referred to as ‘bank rate’, ‘interest rate’ or ‘base rate’.
The base rate is the interest rate that banks and lenders pay when they borrow from the Bank of England.
It is the most important interest rate in the UK. It influences most interest rates, including savings accounts, credit cards, loans and mortgages.
Usually mortgage rates go up or down quite soon after the base rate changes.
The Monetary Policy Committee (MPC) decides the base rate. The committee meets to discuss it every 6 weeks.
The MPC met on 17th March and decided to increase the base rate to 0.75% from 0.50%.
The MPC changes the base rate to meet government targets to keep inflation low and stable.
Inflation rose to 5.4% in December, and it is expected to increase to around 6% in March and April.
That is why the base rate was increased on 17th March 2022, and it may be increased again this year.
The rate was cut to a record low of 0.5% following the financial crisis of 2008/9.
It stayed at the same level for years before the MPC cut it to a new low of 0.25% in August 2016 after the Brexit vote.
It was 0.75% from August 2018 to March 2020 when it was cut to 0.25% because of coronavirus.
The base rate was then cut again to 0.1% on 19 March 2020, raised to 0.25% on 16 December 2021, raised to 0.50% on 3 February 2022 and again raised to 0.75% on 17th March 2022
On 21 May 2020, the Bank of England said that the base rate could drop lower than 0.1%, possibly to a negative interest rate.
The bank’s governor, Andrew Bailey, said they’re looking at other banks that have used negative interest rates to see how they could work in the UK.
A negative interest rate means that you do not pay any interest when you borrow money. Instead, the lender pays you interest.
If the Bank of England sets a negative base rate, it does not mean that there will be negative fixed rate mortgages.
If you are on a tracker or discount rate mortgage, you could end up with smaller monthly repayments.
The next meeting is on 5th May 2022.
The Monetary Policy Committee (MPC) meets around every 6 weeks to discuss if the base rate should go up or down.
The most recent base rate meeting was on 17th March, when the base rate was increased to 0.75%.
The most useful step that you can take is to get in touch with us at Mainly Mortgages. We are the experts when it comes to assisting you with mortgage rate rises .
A mortgage is a loan secured agains your home. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.
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