United Kingdom interest rate rises - but what does it all mean?

United Kingdom interest rate rises - but what does it all mean?

"With incomes already squeezed, even having to pay £20 more on average per month on a mortgage after today's rise could push people who are just holding on by their fingertips from paycheque to paycheque, into the red."

Finally, in the press release, it was confirmed that "any future increases in Bank Rate would be expected to be at a gradual pace and to a limited extent", and that the future forecasts that return inflation to its target are based upon two more interest rate increases.

The rate for a 15-year fixed home loan is now 3.05 percent, and the rate for a 5-1 adjustable-rate mortgage (ARM) is 3.16 percent.

Interest rates are still extremely low at the moment, so locking one in for as long as you can make sense, especially as increasing mortgage portability means that opting for a long-term rate no longer necessarily means you have to stay at the same property for the duration of the deal. But this base rate increase is comparatively small, so it's not clear whether it will have much impact. At present the average two-year fixed rate for someone with a 10% deposit is 2.31%, with a best rate of 1.89% plus a £1075 set-up fee. Lenders change their standard variable rates not only based on interest rate moves, but for their own competitive advantage.

Martin Lewis, founder of MoneySavingExpert.com, said: "Millions of people on variable mortgages will see a direct increase in cost of roughly £200 a year per £100,000 of outstanding mortgage".

It is pencilling in growth of 1.7% for 2020. The pound's value tends to be affected by investors' judgements on whether they'll receive a good return if they keep their assets in sterling investments.

However, he added: 'The impact of this decision will be to raise the cost of mortgages for many borrowers who have never previously experienced a rate increase. But it's not impossible. An expected 0.25% rise, to 0.5%, will push United Kingdom interest rates back to pre-Brexit levels.

Laith Khalaf, a senior analyst at Hargreaves Lansdown, said: "The Footsie has climbed this week on the back of a falling pound, as currency markets groaned at the Bank of England's weak expectations for future interest rate rises". Analysts are unanimous that the BoE will raise rates for the first time in 10 years, bringing United Kingdom interest rates back to pre-Brexit levels.

"This change must be allowed to properly bed in before further increases are considered". He was advised to "lock-in" the record-low rate with a fixed product over the summer.

"Though consumer house-buying power improved in August, affordability is likely to fade as mortgage rates are expected to rise in the months to come, but lower affordability is only significant to potential first-time buyers". See local mortgage rates.

To see where Bankrate's panel of experts expect rates to go from here, check out our Rate Trend Index. Another case of getting ripped off?

Millions of homeowners with variable rate mortgages facing higher monthly payments. It's something borrowers need to watch like hawks.

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