Every time the Bank of England’s Monetary Policy Committee meets, mortgage borrowers understandably want to know one thing: what does this mean for me? The base rate is one of the biggest single influences on the cost of borrowing in the UK, but its effect on your mortgage depends heavily on the type of deal you’re on.
What the base rate actually is
The base rate is the interest rate the Bank of England charges other banks and lenders when it lends to them. It’s the foundation that most other borrowing costs in the economy are built on, including many mortgage products. When the base rate moves, lenders often adjust their own rates in response — though not always immediately, and not always by the same amount.
How it affects different mortgage types
Tracker mortgages are directly linked to the base rate, usually at a fixed margin above it (for example, “base rate plus 0.75%”). If the base rate goes up or down, your monthly payment moves with it, typically within a month.
Standard Variable Rate (SVR) mortgages are set by your individual lender and tend to move in the same direction as the base rate, but the timing and size of the change is at the lender’s discretion.
Fixed-rate mortgages aren’t affected at all during their fixed term — your payment stays the same regardless of what the Bank of England does. However, base rate movements influence the fixed rates being offered to new borrowers and to anyone remortgaging once their current deal ends.
What this means if you’re coming to the end of a deal
If your fixed or tracker deal is due to expire in the next six months, base rate expectations will feed into the rates available to you when you remortgage. It’s worth starting the conversation early rather than waiting until your deal ends and defaulting onto your lender’s SVR, which is usually more expensive.
What this means if you’re buying
Base rate movements affect affordability calculations and the rates lenders are offering, which can change how much you’re able to borrow and what your monthly payments will look like. If you’re partway through the buying process, it’s worth checking whether your Agreement in Principle still reflects current market conditions.
A word of caution
Headlines about base rate changes can be alarming, but the actual impact on your specific mortgage depends on your deal type, when it was taken out, and your lender’s individual pricing. Rather than reacting to news coverage alone, it’s worth getting a clear picture of your own situation.
Base rates, product ranges and lender pricing change frequently — the figures and product types mentioned here are for general illustration only and should always be checked against current market conditions.
If you’re unsure what a base rate change means for your mortgage, or your deal is coming up for renewal, we compare the whole market to find the right option for your circumstances. Get in touch for a free, no-obligation conversation.
