Will The Recent Rise In Base Rate Affect The Cost Of Your Borrowing?

You may well be aware that, to try to deal with inflation, the Bank of England recently increased the base rate from a record low of 0.1% to 0.25%. So, will this small increase have any impact upon how much you are charged for your borrowing here in the UK?

If you have an overdraft facility for your business account then it is likely that the cost of any borrowing you incur on that liability will increase. If you have a business loan or commercial mortgage that is on a fixed rate then it is unlikely you will see a change to your repayments during the period of the fixed rate borrowing. If your business loan or commercial mortgage is connected in some other way to the base rate then it is likely that your repayments will increase.

Well, if you have a residential mortgage then it could depending upon what type of mortgage you have. For instance, if you are on a fixed rate then it shouldn’t make any difference during the period that you are on the fixed rate for. If you are on a standard variable rate then your repayments may increase if the bank or building society decides to increase their variable rate. If you are on a tracker mortgage that tracks the base rate then your monthly repayments will no doubt increase.

If you have a personal overdraft facility then it is likely that the cost of any borrowing will increase. If you have a personal loan that is on a fixed rate then your repayments should remain the same. If you have a credit card then, if the lender increases its interest rates, the cost of that liability would increase.

With regard to commercial mortgages, business loans and residential mortgages, if you find that the increase is unaffordable, then you could always speak to the lender and see if it is possible to extend the term of the borrowing which could lower the new monthly amount you were being expected to pay but it would mean that the total amount repayable over the term of the borrowing will increase.

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