The central bank raised Bank Rate from 3.75% to 4% on November 5. Bank Rate is the UK’s main policy interest rate. The decision was intended to bring inflation, the pace of price rises, back toward its 2% target.
The Bank’s November report puts advertised rates on selected two-year fixed mortgages about 0.6 percentage points above July. The underlying dates matter for the comparison.
A percentage point measures the gap between two interest rates. For example, moving from 5% to 5.6% is an increase of 0.6 percentage points.
Daylight Post found that these mortgage quotes predate the latest policy decision. The provisional October data run through October 27, before the November 4 meeting. The earlier mortgage rise and the later 0.25-point policy increase describe different prices over different periods.
Which mortgage offers were measured?
The figures cover loans worth 75% and 90% of a home’s value. At 75%, someone borrows £75 for every £100 the home is worth. These are two-year fixed offers, rather than rates on existing loans.
Lenders can move before the central bank
A lender sets its own mortgage rates. UK Finance, the banking industry body, explains that lenders consider their funding costs, the type of loan, the borrower’s finances and competition from other banks. They can change offers between central-bank decisions.
That is why a new mortgage offer need not move by exactly the same amount as Bank Rate. Funding a two-year fixed deal involves costs and expectations beyond the policy rate on one day.
Existing borrowers face different timetables
A fixed-rate mortgage keeps its agreed interest rate for a set period. MoneyHelper, the public money-guidance service, explains that the monthly payment stays the same during that deal despite market changes. When the deal ends, the borrower moves to the lender’s standard variable rate unless they arrange a new deal.
A tracker mortgage follows a reference rate, usually Bank Rate, under its contract. The lender’s standard variable rate is different: the lender sets it. A policy-rate change therefore reaches borrowers through the terms of their particular loan.
For someone replacing an older deal with a low rate, a new offer can reflect changes accumulated over years. Someone already on a higher rate faces a different comparison. The effect on this month’s budget depends on when the deal ends as well as the latest announcement.
Higher living costs can squeeze a household even while its mortgage payment stays fixed. Money Untold explains why inflation can reduce a debt’s real value while leaving the monthly budget under pressure.