The advice has come from data analysis provider Moneyfacts.co.uk, which has just assessed the impact of the Bank of England (BoE) base rate rise a month after it increased by 0.25% to 0.75%.
Default rates
According to its data, borrowers on standard variable rates (SVRs) were the most likely to have seen rate rises since early August. Statistics show 60% of providers increased their SVR and only two lenders – Bath Building Society and Principality Building Society – have passed on less than the 0.25% increase.
And Moneyfacts thought more rises could be on the horizon for SVRs, which is the rate to which mortgages default when fixed-term deals end. Only Yorkshire Building Society has announced it will not be increasing its SVR following the latest BoE rate rise.
Charlotte Nelson, finance expert at Moneyfacts, said: “With this knowledge, borrowers sitting on an SVR may feel they are as yet getting a break from the full effects of the base rate rise. However, this is not the case, particularly as the highest SVR currently stands at 6.33%.”
Tracker deals
Those on variable rate deals, are likely to have had varying experiences of rate rises. Moneyfacts said following the last BoE rate rise in November, the full 0.25% rise was passed on to the average two-year tracker mortgage just 16 days later.
But this time, lenders had been slower to react. Moneyfacts’ data shows while variable rates have all risen one month on, none have increased by the full 0.25% as widely expected.
Fixed-rate mortgages
The fixed-rate market, meanwhile, has seen the average rates remain the same over the month since the BoE hiked rates. According to Moneyfacts, providers had already factored the rate rise into its prices in the lead up to the announcement and were holding off from further increases to help attract borrowers considering remortgaging away from their SVR.
Indeed, Nelson advised any borrower sitting on their SVR to remortgage right away. “They could save £250.35 a month or £3,004.20 a year by simply switching from the average SVR (4.84%) to the average two-year fixed-rate (2.53%).
“The ball is now rolling for base rate rises, with at least a quarter-point rise expected in the foreseeable future.
“Borrowers now shouldn’t rest on their laurels and should opt for a fixed deal to protect themselves from any future rate rises.”
