What Happens When the Bank of England Changes Its Base Rate?

The Bank of England base rate is one of the biggest factors affecting mortgage interest rates in the UK, but what does a change actually mean for you and your mortgage?

Whether you’re a first-time buyer, remortgaging, or a homeowner on a variable deal, it’s important to understand how the base rate affects your monthly payments, and what steps you can take to stay ahead.

What Is the Bank of England Base Rate?

The Bank of England base rate is the interest rate that the central bank charges other banks and lenders to borrow money. It’s a tool used to manage inflation and economic growth.

When the base rate rises, borrowing becomes more expensive. When it falls, borrowing gets cheaper which has a direct impact on mortgage rates.

How Does a Change in the Base Rate Affect Your Mortgage?

Fixed Rate Mortgages - If you’re on a fixed-rate mortgage, a change in the Bank of England base rate won’t affect you immediately. Your interest rate is locked in for the length of your fixed term (typically 2, 3 or 5 years), so your monthly payments will stay the same, even if the base rate moves up or down.

However, if your fixed deal is due to end soon, any remortgage offers or new rates you apply for will be influenced by the current base rate.

TIP: If your deal ends within 6 months, it’s smart to speak to a mortgage adviser now to lock in a new rate.

Tracker Mortgages - Tracker mortgages are directly linked to the Bank of England base rate so if the base rate goes up or down, your mortgage rate and monthly payments will change immediately.

For example, if your deal is “Base Rate + 1%,” and the Bank of England reduces the rate from 5.25% to 4%, your mortgage rate will also drop from 6.25% to 5%.

Be aware: While your payments may go down in a rate cut, they’ll also increase just as quickly when rates rise.

Variable Rate Mortgages (Standard Variable or Discounted) - If you’re on a variable rate mortgage (such as a lender’s Standard Variable Rate or a discounted rate), things are a bit more unpredictable.

Your interest rate can change when the base rate moves, but it’s up to your lender to decide if and when they pass on the change.

Some lenders adjust quickly, while others may delay or choose not to change at all.

That’s why it’s important to review your mortgage regularly and compare what other lenders are offering.

What Should You Do When the Base Rate Changes?

1. Check your current mortgage type – Are you on a fixed, tracker, or variable rate?

2. Check your deal expiry date – If your fixed term ends within 6 months, it’s time to review your options.

3. Speak to a mortgage adviser – An expert can search the whole of the market, explain your options, and help you decide whether to remortgage, switch to a better deal, or stay put.

How Model Financial Solutions Can Help

At Model Financial Solutions, we specialise in helping:

• First-time buyers

• Home movers

• Remortgaging clients

• Self-employed professionals

• Limited company directors

We understand how changes in the Bank of England base rate can affect your financial plans and we’re here to provide honest, clear advice tailored to your situation.

Ready for a Mortgage Review?

If your deal ends in the next 6–12 months, or you’re unsure how a rate change will affect you, book a consultation today.

Let’s make sure your mortgage is working hard for you no matter what the Bank of England does next.

Risk warning : Your home may be repossessed if you do not keep up with payments on your mortgage.