What does the Interest Rate Rise mean for me?

On the 16th December 2021, the Bank of England announced that it would be increasing interest rates from 0.1% to 0.25%. We explain what this means for first time buyers, and why now is still a great time to buy.

  1. Interest rates, what are they?  

Put simply, an interest rate is what you are charged when you borrow money, for example, if you take out a mortgage.

The Bank of England sets the main interest rate, sometimes called the base rate. Commercial lenders, the bank or building society who gives you your mortgage, use this rate to determine how much interest they should charge when they offer you a mortgage.

Those on variable mortgage rates or those who are looking to apply for a mortgage, might see a small increase in monthly payments if interest rates increase.

  1. If I’m looking to get a mortgage, should I be worried about this increase?

This latest announcement shouldn’t stop your property search.

Even with this increase, interest rates are still very low compared to what they have been historically. In early 2020, the base rate was 0.75, and in the last fifteen years, they have been as high as 5.5%.

So, if you are looking to secure a mortgage to purchase a home, you shouldn’t feel the effects of this latest increase too acutely.   

  1. Is now still a good time to buy?

Absolutely! Interest rates remain very low today – and they can increase over time, so it’s worth speaking to a mortgage advisor to work out what’s best for you – for example, they might suggest a fixed rate mortgage for a longer period of time, such as 5 years.

There are still a number of schemes out there to support first time buyers, such as Help-to-Buy Equity Loan and of course, Shared Ownership. Why not check out the selection of homes we have available.