The Bank of England (BoE) raised their base interest rate to 3%. Less than one year ago, the rate was 0.1%. The BoE aims to keep inflation (the rate at which prices increase) at 2%. However, inflation has been above 2% for over a year. Therefore, the BoE increases the interest rate to influence inflation. It is believed that interest rates could be 4.75% by next year.  

By increasing the base rate, the cost of borrowing would also increase, which leads to a reduction in the demand for it from consumers, households, and business. As a result, this slows down the economy and allows things to settle. 

Furthermore, a higher base rate also impacts mortgages. For instance, those on variable rate tracker mortgages would expect to see an immediate impact on mortgage repayments. 

Here are 3 ways it could impact you: 

1. Mortgages:  

• If you are currently on a fixed rate, there will be no changes  

• Once the fixed term ends, you may be on a significantly higher rate 
• Variable mortgages are expected to increase by £40 a month per £100,000 of mortgage 

1. House prices:  

• Nationwide reported that house prices decreased significantly for the first time in 15 months in September 2022 
• Rising mortgage rates will mean that it is more expensive to borrow 

• This lowers demand from new buyers, slowing down the housing market 

1. Savings: 

• Banks are now offering better savings rates, but they are still below inflation  

• It may therefore be better to pay off debt 

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