On 17 March 2022 the Bank of England Base Rate increased by 0.25% to 0.75%, the third rate rise in four months.
The Bank of England described this rate increase as a method to help control inflation, explaining “the main tool we use to bring inflation down is to increase interest rates. Higher interest rates makes borrowing more expensive and it encourages saving. That reduces how much people spend overall. And this will help to keep inflation down.” With the Bank of England predicting inflation to reach 8% this spring, consumers are facing increased costs of energy and food. Ofgem predicted the energy price cap increase, which came into effect on 1 April, will impact 22 million people, with those on default tariffs seeing an increase of £693 from £1,277 to 1,971 per year.
When we consider our response to base rate changes we take account of the potential impact on both mortgage borrowers and savings members. The base rate increased by 0.25% on 17th March and there have now been three rate increases in quick succession. Whilst savers may be keen to see interest rates rise, the knock-on effect is that the cost of mortgage borrowing also increases.
Having previously taken action to increase our variable mortgage and savings rates following the earlier two base rate changes, we are now mindful of the squeeze on household budgets for our mortgage borrowers. As a result, we will not be passing on any increase to our variable mortgage and savings products on this occasion. (For mortgage borrowers with a Base Rate tracker mortgage any Base Rate increase will be applied from the start of the next calendar month, in line with the terms and conditions of the mortgage.)
The Society has previous taken the following action in response to previous rate changes:
• 3 February base rate increase by 0.25% to 0.50%: effective 1 March we increased our mortgage Standard Variable Rate (SVR) and the majority of variable rate savings by 0.15%
• 16 December base rate increase by 0.15% to 0.25%: effective 4 January we increased our mortgage Standard Variable Rate (SVR) and the majority of variable rate savings by 0.15%
Mortgage payment difficulties.
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