Mortgages after base rate rise

mattconway

Hello

Me and my partner will be applying for a mortgage for our new build in December. I just wanted to know if the base rate rises in November. Do lenders generally put their rates up by 0.25 or is it a lot more because they can?

Thanks in advance

juniordoc

Many lenders have already started to raise their rates in anticipation of a base rate rise. In my experience they are more likely to introduce a few smaller rises rather than a 0.25% rise in one go.

amnblog

It is not as simple as that Matt. The effect of a base rate rises depends on the type of mortgage product you have.

Tracker Rates

If you have a Tracker rate it will most likely rise and fall with the base rate as it is designed to 'track' the base rate. However, not all trackers track the Bank of England Base Rate, some track the Lenders own 'Base Rate' (as is the case with Barclays). In that case as an example, Barclays decide what they will do to their Base Rate themselves.

Libor Rates

There are also rates which are linked to the underlying Libor rate. This is the rate that Bank's charge each other for short term loans.

Variable Rates

A variable or discount rate will tend to move in the direction of the Base Rate, but again the individual Lender decides the amount, and timing, of that movement.

Fixed Rates

A fixed rate is not set by Base Rates. It is set by what are called swap rates, these are the rates at which Bank's lend to each other. These swap rates do not move strictly in line with Base Rates, so for example, many Lenders have increased fixed rates in the last 14 days even though the BOE base rate has not yet moved.

As ever, your mortgage broker is the best source of advice as to the right type of mortgage product for you.

mattconway

Thank you for your advice. We will be looking to get a 5 year fixed help to buy mortgage in 5 weeks time.