Moneyfacts reacts to the interest rate rise by BOE | moneyfacts.co.uk

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Rachel Springall

Rachel Springall

Finance Expert & Press Officer
Published: 03/02/2022

The Bank of England has today increased base rate by 0.25% up from 0.25% to 0.50%. Moneyfacts.co.uk has analysed the average rates offered across savings and mortgages and considers what this decision may mean for consumers moving forward.

Mortgage market analysis

Average mortgage rates

Aug-18

Dec-18

Feb-21

Dec-21

Jan-22

Feb-22

Standard variable rate (SVR)

4.72%

4.90%

4.41%

4.40%

4.41%

4.46%

Two-year fixed mortgage

2.53%

2.51%

2.53%

2.34%

2.38%

2.44%

Five-year fixed mortgage

2.93%

2.92%

2.73%

2.64%

2.66%

2.71%

10-year fixed mortgage

3.10%

3.08%

2.85%

2.97%

2.97%

2.85%

Average rates shown are as at the first available day of the month, unless stated otherwise. Source: Moneyfacts.co.uk

 

Rachel Springall, Finance Expert at Moneyfacts.co.uk, said:

“Mortgage rates are on the rise, and this base rate rise may come as disappointing news to borrowers who are not locked into a competitive rate. Lenders are still launching attractive deals onto the market, so anyone who is still debating on whether to fix may be wise to do so now. Those looking for peace of mind with their mortgage payments over the next few years may wish to consider a five-year or even 10-year fixed mortgage to protect them from future rate rises. Borrowers who are sitting on a standard variable revert rate could stand to save a significant sum on their repayments by switching to a fixed rate.

“Those borrowers who may be sitting on their standard variable rate (SVR) for a few months could have already seen an increase since the December base rate announcement, but in the months to come they could see it rise further still due to the latest rate rise decision. The difference between the average two-year fixed mortgage rate and SVR stands at 2.02%, and the cost savings to switch from 4.46% to 2.44% is a difference of £5,182 over two years* approximately. A rise of 0.25% on the current SVR of 4.46% would add £684* approximately onto monthly repayments over two years.

*Average standard variable rate (SVR) is currently 4.46%. Calculations based on a £200,000 mortgage over a 25-year term on a repayment basis.

Savings market analysis

Average savings rates

Aug-18

Dec-18

Feb-21

Dec-21

Jan-22

Feb-22

Easy access

0.53%

0.64%

0.17%

0.20%

0.20%

0.21%

Notice account

0.86%

1.07%

0.38%

0.54%

0.56%

0.53%

Easy access ISA

0.82%

0.94%

0.25%

0.26%

0.27%

0.26%

Notice ISA

0.98%

1.14%

0.40%

0.37%

0.37%

0.37%

Averages based on £10,000 gross rate. Average rates shown are as at the first available day of the month, unless stated otherwise. Source: Moneyfacts.co.uk

 

Rachel Springall, Finance Expert at Moneyfacts.co.uk, said:

“Savers may be pleased to see this latest base rate rise, but, in truth, it might not be passed on to them in full, or at all. As we have seen since the December rate rise, there are many variable rate savings accounts yet to benefit from the previous 0.15% rate rise, so savers would be wise to check their account and reconsider their loyalty if they have been left out. It could take a few months for this latest rise to be passed on, but should savers see 0.25% passed onto them, it would mean receiving £50 more a year in interest based on a £20,000 investment.

“Vigilance is crucial when it comes to grabbing a top rate deal, as there is no guarantee they will sit on the shelf for long. Challenger Banks and building societies are currently offering some of the best easy access accounts out there, whereas high street banks can pay as little as 0.01%. Shopping around is essential and even if a brand is unfamiliar, so long as they have the same protections in place as a high street bank, there is little reason to overlook them.”

Disclaimer

Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time. Links to third parties on this page are paid for by the third party. You can find out more about the individual products by visiting their site. Moneyfacts.co.uk will receive a small payment if you use their services after you click through to their site. All information is subject to change without notice. Please check all terms before making any decisions. This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.

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