UK Finance Responds to Bank of England Base Rate Rise

Responding to today’s MPC decision to raise the base rate by one-quarter of one per cent, UK Finance Head of Personal Eric Leenders said:

“Whilst this is a small rise from a historically low base, anyone who thinks they may find it difficult to manage their finances should always contact their provider as soon as possible to discuss the support that’s available to help them. With most mortgage and personal loan holders, as well as businesses and credit card customers paying a fixed rate, many will see no change while their current deal lasts. 

“Given that lenders offering variable rates assess a customer’s ability to pay at much higher interest rates, most should be able to cope with any increases as they filter down.  Lenders consider a number of factors when deciding how to respond to a change in the base rate, and in this competitive environment where it’s easy to switch providers, customers who are thinking about borrowing money should shop around to take advantage of the best deals on offer.

“Savers will welcome a rate rise, although the effects may not be felt immediately because banks will be looking to balance the increased cost of customer borrowing with the savings returns they offer.”
Commenting on the impact on mortgages June Deasy, Head of Mortgage Policy at UK Finance said:

“The majority of borrowers will be protected from any immediate effects of today’s small increase because they have a fixed-rate mortgage.  Over the last year, two thirds of first-time buyers have opted to fix their rate for up to two years, with a further one in four opting to fix for two to five years.

“Given that variable rate lenders assess the ability of applicants to pay at much higher interest rates, most should be able to cope with any increases as they filter down. 

“Rates remain very low by historical standards and borrowers remain well placed to get a good deal from the UK’s increasingly competitive mortgage market.  Anyone with concerns about managing their mortgage should contact their lender as soon as possible to discuss the advice and support available.”