How The Bank Rate Increase Will (Or Won't) Affect Your Mortgage Repayments.

You've just moved into your first home.

Adulting is going WELL.

The garden fence is falling. The shower doesn't work. The washing machine leaks. But you love it all the same.

You're proud of yourself. The first bricks you can call your own.

But as you empty the leaking washing machine, your ears perk up at the news.

'Bank rate increases set to impact mortgage rates.'

What's happened now?

From today, the Bank rate has increased to 0.25%. It was 0.15%. This doesn't sound much, but it's almost double. Imagine getting double the fries with your Nando's. Fabulous.

Although when it comes to bank rates, increases aren't fabulous.

Increases worry people.

Bank rates affect outstanding loans. And what's many people's biggest outstanding loan?

Their mortgage.

And for the average homeowner, that's a whopping £140,000.

Aka A LOT of money.

A lot of money you want to understand.

But for many of us, talk of 'bank rates' and 'mortgage rates' makes us doze off.

Don't worry. We'll keep it simple.

Bank rates and mortgage rates. Like two peas in a pod.

The bank rate is set by the Bank of England. It's the most important interest rate in the UK. Interest meaning the cost of borrowing money.

Over recent years, mortgage rates have declined to near-record lows. Bank rates have mostly stayed steady.

Or when they've had a momentary blip, mortgage rates haven't really followed. Good news for homeowners.

Why are mortgage rates declining?

There aren't many houses available. Basically.

So, looking at history, the bank rate increase shouldn't cause mortgage rates to skyrocket.

You can refrain from mass panic.

Will the bank rate increase affect me?

Probably not. At least in the short term.

96% of new borrowers have opted for a fixed rate contract since 2019. These lucky folk will see no immediate increase in monthly repayments. Chances are, you're in the 96%.

Added to that, more borrowers are opting for longer period fixed rates. 45% of borrowers went for a five-year fixed rate in 2021, compared to 30% in 2017. In English? A fixed rate means your monthly repayments aren't affected by bank rate changes. These lucky folk can refrain from mass panic in the medium term.

But ... I'm not one of those lucky folk

Meaning you have a variable rate mortgage. Or Standard Variable Rate (SVR) mortgage.

Our estimates - based on 850,000 mortgage borrower trackers suggest:

• For variable rate mortgages, expect an increase of around £15.45 per month.
• For SVR mortgages, roughly a £9.58 increase per month.

Noticeable? Yes. But not horrendous.

‘I need to return to my leaky washing machine now.’

Meaning you've decided there's no need for mass panic. Good.

If you're one of the 96% on a fixed rate contract, you won't see a change for the duration of your fixed rate. And looking at the stats, more people are opting for longer periods.

If you're on a variable rate or SVR, there will be an increase to monthly repayments. But nothing too awful.

Roughly the cost of a Nando's.

Share your thoughts below. How do you feel about the bank rate increase?