Commenting on the historic increase in Base Rate, Nitesh Patel, Strategic Economist at Yorkshire Building Society, said:

The Bank of England announced (16 June 2022) a 0.25% increase to Base Rate, which means the official rate1 has hit 1.25% for the first time ever in almost 330 years. It is also the first time since July 2007 that we have seen a run of five consecutive changes which have all been increases. 

The trajectory has clearly been set as the Bank of England look to bring inflation under control. However, there is a fine balance between achieving this and making sure that the economy, and importantly jobs, are protected as far as possible given that a number of factors, such as rising food and fuel prices, will not be dampened by this latest increase.

Households are already struggling with the rising cost of living and, whilst this is good news for savers, mortgage borrowers will be looking to assess how this will impact their monthly outgoings. That said, the majority of borrowers are on fixed rate mortgages so in the short term, they will be unaffected, but the impact will be felt when they come to the end of their existing fixed rate deal and will inevitably be looking at higher mortgage rates.

[1] Source Bank of England historic official rates - October 1694, Bank Rate; October 1972, Min Lending Rate; August 1981, Min.Band 1 Dealing Rate; May 1997, Repo Rate; August 2006, Official Bank Rate.

All information correct at time of publication.