Bank of England 

What does today's rate rise mean for you?

What does today's rate rise mean for you?

Today, after years of flirting, Mark Carney has finally committed and gone through with the rate rise he was teasing us with for months.

The Bank of England's monetary policy committee has voted to increase the Base Rate from 0.25 per cent to 0.5 per cent.

But how will this affect your clients and what, if anything, should be done about it?

1) Variable rate mortgages

These are the 3.9m people at the sharp end of today's announcement since, as their are on variable rate mortgages, their monthly payments will be going up.

However it is worth remember that, according to analysis by Moneyfacts, the average standard variable rate has fallen from 7.41 per cent in July 2007 - the last time we saw a rate rise - to 4.6 per cent today.

Based on this average, today's rate rise represents an increase of £28.72 to monthly repayments.

But all is not lost for these people.

Charlotte Nelson, finance expert at Moneyfacts, said: "Lenders have been keen to attract the attention of borrowers to protect their mortgage book in case of a rate rise, which is one of the main reasons both the cost and availability of deals has improved.

"The number of mortgage deals has increased to 4,748 from 4,151 in just one year.

"With fixed rate mortgages still low, borrowers will be significantly better off switching deals now before it may be too late."

According to UK Finance, those on SVRs have higher rates but typically a lower debt, at £91,000 compared to £141,000 for those on fixed rates.

The 1.4m borrowers on tracker rate deals have higher average balances, at £131,000, than those on SVRs, but their average interest rate is lower at 1.73 per cent.

2) Fixed rate mortgages

This is where we get into the seachange which has happened in the mortgage market since the financial crisis.

The vast majority of new borrowers are on fixed-rates: more than half of all outstanding regulated loans are currently fixed-rate, as is 80 per cent of all new lending.

In the immediate aftermath of the financial crisis more than 70 per cent of all mortgage debt was variable rate. This now sits at just 43 per cent, according to the Bank of England.

But borrowers have been acting on speculation about a Base Rate rise for some weeks, meaning that while these borrowers will be able to carry on as normal for now, they may find themselves moving onto higher rates when their term ends.

A 0.04 percentage point increase since 1 October has taken the average two-year fix to 2.24 per cent after 21 lenders upped their rates, according to data from Moneyfacts.

Skipton and Nationwide were among the first major lenders to raise their rates on 29 September, with Halifax following suit on 2 October with increases of up to 0.2 percentage points.

NatWest increased rates across its core residential range on 6 October, as well as reducing the amount of cashback on offer by up to £250.