The direct impact on most people is minimal. Most people with large mortgages are on fixed rates, so the increase has no impact. The proportion of borrowers with variable mortgages has fallen to only 35% compared with 70% in 2001. For those on a variable rate mortgage, then an extra 0.25% adds £12 a month to a £100,000 repayment mortgage and £25 on a £200,000 loan. Banks tend to push through rate rises on mortgages immediately but are much slower to raise savings rates. This week’s rise was no exception on both counts.
The average interest rate on an easy access account at one of the “big five” high street providers is currently only 0.23%. The most that savers are likely to see is increases to 0.3% or 0.4%, as the banks use the rate rise to widen their net interest margin and increase their profits.