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iNews article on base rate decision

ended 14. December 2022

The iNews website is doing a preview of tomorrow's base rate decision - how it affects people's mortgages, savings and annuity rates — and anything else. They are assuming an increase of 0.5%, which is the consensus. How much will tracker mortgages likely go up by? And what will happen to fixed rates? And will savings rates go up, too? What will happen to annuity rates? Deadline is ASAP.

16 responses from the Newspage community

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Gareth Davies
Director at South Coast Mortgage Services
In terms of tracker mortgages, those in an existing tracker period will see their rate also increase by the 'likely 0.5%' increase tomorrow, impacting their payments from January. It remains to be seen how lenders will react pricing-wise when it comes to new business. The margins on tracker products have been improving for a number of weeks now, and I would imagine that the December increase has long been accounted for by lenders. I wouldn't be surprised to see margins reduce even further, although that might be the Xmas Sherry talking. As for fixed rates, these too have been getting better for a number of weeks, and with swap rates seeing an improvement too, I would be surprised if the base rate change has much, if any, impact on the fixed deals available.
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Mike Staton
Director at Staton Mortgages
It is likely that base rate trackers will go up but I believe an increase of 0.25%-0.5% will still keep tracker rates a cheaper costing option than a fixed rate and with the added benefit that some, not all, come with no ERCs, the right tracker could still be the most sensible option. Fixed rates have been based on a much higher swap rate than the BOE base rate so I see very little impact on fixed rates other than further reductions.
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Scott Gallacher
Director at Rowley Turton
I think it's fair to say that this rate rise is already priced into the market. Consequently, there is unlikely to be much impact in terms of consumer mortgage or savings rates.
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Riz Malik
Independent Financial Adviser at R3 Wealth
The majority of new business is being done on trackers at present so any rate rise will increase borrowing costs. Considering the Bank of England is predicting inflation to fall dramatically by this time next year, the anticipated 0.5% base rate increase is going to have little impact other than making people poorer. I have no idea what the Bank of England or the Government are doing at present and I am not sure they do either.
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Samuel Mather-Holgate
Independent Financial Adviser at Mather and Murray Financial
Due to todays inflation figures still being too high, the Bank of England will increase base rate by 0.5%. This will increase tracker rates by the same amount, but fixed rates might not increase as much. A lot of these increases are already factored in to fixed rates and lenders will want to start attracting funds as appetite for transactions dries up.

Most new savings account rates will increase off the bank of the decision, but only those fighting for business. A lot of historic savings accounts eat next to nothing and this won’t change things.
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Craig Fish
Director at Lodestone Mortgages
It is widely anticipated that we will see a 0.5% increase in the base rate tomorrow. This isn't going to have much impact on the rates we are seeing as the increase has already been priced in. Some lenders, who have already removed their tracker products from the market, in advance of the announcement will likely return to the market with slightly adjusted pricing, likely to be almost identical margins to what was previously available. What will be more interesting is the commentary from Andrew Bailey afterward, as this is likely to have an impact on swap rates. A more positive outlook means swap rates will drop and this will (hopefully) be passed on by lenders to reduced fixed rates. I am expecting lenders to launch a rate war in the new year as they vie for business to eat away at their lending targets which will have been reset to zero
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Rhys Schofield
Brand Director at Peak Mortgages and Protection
There is no need to panic because the potential and pretty widely predicted rate rise is likely baked into a lot of fixed rate deals at the moment and we've seen pretty steady rate reductions over the past month or so. It may not be such rosy news if you are on tracker deal where a 0.5% rate rise will mean a 0.5% increase to your rate and more pounds coming out of your pocket and going to the bank each month. Our advice is always the same. If you are worried, pick up the phone to your local mortgage broker.
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Matthew Jackson
Director at Mint FS
Regardless of the this week's encouraging inflation figures, a rise of 0.5% in the Bank of England Base Rate seems baked in. And in truth lenders have already planned for this increase. As a mortgage broker we have built it into our advice for the past few weeks when discussing tracker mortgages with clients. A raise of this amount will lead to all tracker mortgages increasing by the same margin the next day and will no doubt put pressure on the finances of a huge number of families as Christmas approaches. Fixed rates are continuing to fall as swap rates continue to adjust downwards and I cannot see the BOE decision affecting these before Christmas.
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Chris Sykes
Technical Director and Senior Mortgage Adviser at Private Finance
On the mortgage side of things, this is likely to only significantly affect those on variable/tracker rate mortgages. This will also affect those with commercial finance as often this is offered on a margin against the base rate. Usually, lenders will review their standard variable rates after a base rate decision. We have seen some examples of lenders not passing onto borrowers the full increase in base rate on their standard variable rates, which is helpful. We do not expect to see any major movements in fixed rates as the general response we are getting from lenders is they have priced the base rate rises into rates already.
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Graham Cox
Director at Bridging Hub
A 0.5% base rate hike will automatically be passed on for those on tracker rates, as by definition they track the base rate plus the lender's additional percentage. Fixes may be a different story, as lenders could have some wiggle room to not pass on the full 0.5% increase. Nevertheless, after falling in recent weeks, it's likely fixed rate deals for borrowers with good credit and a decent deposit will jump to around 5% again.
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Jonathan Burridge
Founding Adviser at We Are Money
A rise in base rate is widely expected and it could be anywhere between 0.25% and 0.75%, although consensus is 0.5% inflation is still far higher than desirable. Also, we haven't moved as far or as fast as the US Federal Reserve, so, don't be surprised if it is 0.75%. Swap rates have been falling and we expect that mortgage fixed rates still have scope to drop further. Those on tracker or lender variable rate loans will see changes either in a few days or at the start of next month. These are all the signs showing that the market is starting to reflect historic activity and there will be more changes, although less erratic, for the foreseeable future.
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Gary Boakes
Director at Verve Financial
Lenders usually reprice their products 14 days before the Bank of England meeting, so the expected 0.5% rise will have no impact at this stage. Rates have stabilised and are probably where we expected them to be given the current base rate. The key meeting for me will be the 2nd February. How will the Bank of England react if we have 2 months of inflation reductions and whether it is going quickly enough to satisfy no more increases. If they increase rates again, how will lenders react? That will have a bigger impact on Q1 than this week's likely rate rise.
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Rob Gill
Managing Director at Altura Mortgage Finance
As the expectations are overwhelmingly for a base rate rise of 0.5% this is very much priced into current mortgage rates. Anything either side of this however could cause some turmoil amongst lenders as they adjust to a new reality. We'd therefore be very surprised if the Bank of England don't deliver on the widespread expectation as no one wants a surprise this close to Christmas!
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Austyn Johnson
Founder at Mortgages For Actors
Personally, I think the fixed rates are stable now. The swap rates are what dictate this and they are currently also stable. Long may that last!
I do not see a 0.5% interest rise affecting as many as previously, mainly those on trackers.
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Ashley Thomas
Director at Magni Finance
It is unlikely fixed rates will change as lenders have anticipated the base rate increase for a while.
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Alastair Hoyne
CEO, Finanze Capital at Finanze Capital
An increase in interest rates typically leads to a decrease in demand for borrowing, as it becomes more expensive to borrow money. This can lead to a decrease in spending, as people and businesses are less willing to take on new debt. As a result, an increase in interest rates can slow down economic growth. However, it can also help control inflation by making it more expensive for people and businesses to borrow money, which can help maintain the purchasing power of money. Lenders are in a tough position generally, they need to lend to cover deposits or for income. House prices are dropping and inflation remains high, borrowers are stalling. Therefore I don't expect them to be capitalistic in their increases, if anything they will increase their rates by the same amount, or double if anything. Savings are expected to increase as well.