Bank of England reveals interest rate decision

The Bank of England has raised base rate by 0.25 per cent to 4.25 per cent - the highest level since 2008. 

However, the Bank has also moderated its economic forecast for 2023 and no longer believes there will be a recession.

Rachel Springall, finance expert at Moneyfactscompare, says: “A rise to base rate will come as disappointing news to borrowers who are not locked into a fixed rate mortgage, as their monthly repayments may rise in the coming months amid a cost of living crisis. Those borrowers who wish to refinance might be pleased to see that fixed rate mortgages have fallen since the tail end of 2022, and that it is currently cheaper on average to lock into a five-year fixed rate over a two-year fixed deal.

"The incentive to fix is clear from the continued rise to the average Standard Variable Rate, which is now above seven per cent, a level not breached since 2008. A rate rise of 0.25 per cent on the current average SVR of 7.12 per cent would add approximately £772 onto total repayments over two years.

“Affordability may well be the key challenge for borrowers struggling with the cost of living crisis, as interest rates are higher than prospective buyers, or those looking to remortgage, were perhaps anticipating. Whether now is the right time to get a mortgage will entirely depend on someone’s individual circumstances, so seeking advice is vital. In the meantime, it would be wise for borrowers to keep a close eye on the mortgage market, housing supply and house prices, particularly for new buyers who are a critical part of keeping the market moving.”

This week's BoE decision was clear-cut with seven of the nine members of the Monetary Policy Committee voting for the increase.

The minutes revealed that the Bank is now more optimistic about the economy, notwithstanding today's move, and it expects national income to grow slightly in the second quarter of the year rather than shrinking by 0.4 per cent as it suggested just a month ago.

The change would mean that the UK would no longer face a technical recession, defined as two successive quarters of economic contraction.

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