The official bank rate has been lifted from 0.25% to 0.5%, the first increase since July 2007 when rates hit 5.75%. The move reverses the cut in August of last year – made in the wake of the vote to leave the European Union. Almost four million households face higher mortgage interest payments after the rise, but it should give savers a modest lift in their returns.
The main losers will be households with a variable rate mortgage. Of the 8.1 million households with a mortgage, 3.7 million, or 46%, are on either a standard variable rate or a tracker rate. According to UK Finance, the average outstanding balance is £89,000 which would see payments increase by between £11 and £12 a month. The Bank estimates that almost two million mortgage holders have not experienced an interest rate rise since taking out a mortgage. (Reference, BBC News http://www.bbc.co.uk/news/business-41846330)