Base Rate: The impact on your mortgage and savings

Changes to The Bank of England base rate may have you asking what this mean for your savings and mortgage. So we wanted to help you answer these questions

The Bank of England bank rate, also known as base rate is set by The Bank of England’s Monetary Policy Committee (MPC), who usually meet eight times a year to review this rate. You can find the current base rate here.

Base rate is the most important interest rate in the UK, as it’s the rate the Bank of England charges banks and building societies to borrow money from them, including us.

When the base rate changes, either an increase or decrease, we review our mortgage and savings rates and decide how much of the base rate change to pass on to our savers and borrowers. This could be the full amount, part or on occasions we may decide to not pass on any rate change. 

When base rate decreases it's to encourage spending rather than saving, as you earn less on your savings. But mortgage and loan payments usually become lower, if you're on a variable mortgage.

And when base rate increases, borrowing (loans/mortgages) becomes more expensive and discourages consumer spending due to less disposable income, but encourages consumers to save, as you to intend to earn more interest on your money.

You can find out how the Bank of England decides the base rate here. 

 

How will a base rate change affect my mortgage?

If you have a variable rate mortgage with The Cambridge (this includes discounted rate mortgages) your mortgage rate could go up or down. Our variable and discount mortgage rates are not directly linked to the Bank of England base rate but are influenced by it, along with other factors such as funding costs and changes in law and regulations.

If there is a change to base rate, we decide whether to make a change, and by how much. We do not have to pass on the full change. This means it might not always change by the same amount or at the same time as the base rate. You can find more information about these factors and changes in interest rates in the Mortgage Terms and Conditions.

If your mortgage rate is changing, we’ll write to you before your next payment is due, letting you know your new rate and what your new monthly payment will be.

If you have a fixed rate mortgage, your rate and payments will not change during the fixed rate period. If you don't switch your mortgage deal when your fixed rate ends, you will revert to our standard variable rate or buy to let variable rate mortgage.

Find the answers to frequently asked mortgage questions following a base rate change below.

 

How will a base rate change affect my savings?

The interest rate we offer on our variable savings accounts, is influenced by the base rate. If you have a variable rate savings account, such as our Instant Access Account, your interest rate could go up or down.

You’ll also notice that interest rates on new savings account may also change. 

More on how base rate could affect your savings is below.