Bank Rate Hits 4%: Savers Gain, Tracker Payments Rise — SkimNews
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- Bank of England raised its Bank Rate by 0.25 percentage points to 4% from 3.75%, the first increase in more than three years.
- Mitchell Barnes, founder and chief executive of Ryse 3D, said rising rates would lead to reduced employment and greater use of automation and robotics as companies face weaker demand and higher borrowing costs.
- Rachel Springall of Moneyfacts said savers leaving a £20,000 cash pot in closed accounts lost an extra £139 over three years compared with on-sale easy-access accounts; she also said fixed-term deals are usually more lucrative.
- Tracker mortgage holders face roughly £31 more each month on a typical loan after the 0.25-point rise, with about 500,000 such mortgages; some remortgagers are choosing trackers, taking the risk that further hikes will not follow.
- Standard variable-rate homeowners, also about 500,000, must wait for lenders to decide whether to pass on the increase; a typical 0.25-percentage-point pass-through adds £14 a month.
- Fixed-rate mortgage holders account for 87% of mortgage holders and keep monthly payments unchanged until their current deal ends, usually after two or five years; average rates on new fixed deals are already above start-of-year predictions.
Why it matters: Variable-rate borrowers bear the immediate cost: about 500,000 tracker homeowners face roughly £31 more each month, while savers can earn more by shopping around or fixing a deal. Remortgagers still face higher fixed-deal pricing, even though 87% of mortgage holders keep current payments until their two- or five-year terms end.
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