Santander announces mortgage rate reductions as the Bank of England pushes the base rate up to 5.25%
The Bank of England's Monetary Policy Committee (MPC) has increased the base rate to 5.25%.
The Bank's move is the 14th consecutive rise in the cost of borrowing since December 2021 and lifts its rate from 5% to 5.25%. The last time the base rate was this high was in April 2008.
The MPC voted by a majority of 6–3 to increase Bank Rate by 0.25%. Two members preferred to increase Bank Rate by 0.5% to 5.5%, and one member preferred to maintain Bank Rate at 5%.
Santander is the latest big lender to announce it will lower its fixed rates by up to 0.39%. It is also reducing its existing customer rates by up to 0.25% and tracker rates by up to 0.60%.
Aaron Strutt, product director at Trinity Financial, says: "The governor of the Bank of England has said he will do anything to bring down inflation, and once again proved he isn't joking.
"It seems unlikely the base rate will come down this year, and as we have seen, rates have to go up before they come down."
The MPC's updated projections suggest conditioned on a market-implied path for Bank Rate that rises to a peak of just over 6% and averages just under 5½% over the three-year forecast period, compared with an average of just over 4% for the equivalent period at the time of the May Report.
What does the base rate hike mean for borrowers?
The BBC highlights that more than 1.4 million people on tracker and standard variable rate deals usually see an immediate increase in their monthly payments when interest rates rise.
Why are fixed rates getting cheaper when the base rate increases?
Mortgage rates are not directly linked to the Bank of England base rate. Banks and building societies use SWAP rates and the money markets to fund their fixed rates.
The picture above: Andrew Bailey, Governor of the Bank of England.
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The information contained within this article was correct at the time of publication but is subject to change.
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