As the base rate rises, is a variable-, tracker-, or fixed-rate mortgage right for you?
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For the first time in three years, the Bank of England (BoE) has increased the base rate. The rise could impact your mortgage repayments now and may affect whether you choose a variable-, tracker-, or fixed-rate mortgage when your deal ends.
On 5 November, the BoE’s Monetary Policy Committee (MPC) voted to increase the base rate by a quarter of a percentage point to 4%.
One of the reasons for this decision is that the rate of inflation has been persistently above the BoE’s 2% target. This target aims to support economic growth and stability.
One way the BoE can try to reduce inflation is to increase the base rate, which affects interest rates. Higher interest rates typically encourage businesses and consumers to reduce their spending and borrowing, which, in turn, could slow the rate of inflation.
According to the Office for National Statistics (21 October 2026), in the 12 months to September 2026, the rate of inflation was 3.5%, compared to 3.1% a month earlier.
The BoE noted that inflation is expected to rise to around 5% by the middle of 2027. It explained that conflict in the Middle East has driven up energy costs, but there’s limited evidence of knock-on effects on other prices. However, the central bank added: “The degree of inflationary pressure in the pipeline is now sufficient to warrant an increase in Bank Rate. Activity data in recent months have generally been stronger than expected, adding to the case for modestly tighter monetary policy.”
The BoE did not confirm whether there will be further bank rate rises in the coming months. It said monetary policy is “not on a pre-set path” and evidence will be assessed at each meeting.
The base rate directly affects interest rates
The BoE’s base rate influences the interest rates other banks and lenders set. So, it can have a direct impact on your finances.
The base rate rising could be good news for savers, as the amount of interest their savings earn could rise.
On the other hand, if you have debt, interest rates rising could affect your repayments and the total cost of borrowing. As you often use a mortgage to borrow large sums, even a seemingly small increase of 0.25% to the rate you’re paying could add up.
If you have a variable-rate mortgage, the interest rate you pay can rise and fall depending on your lender’s rate. It’s likely that following the BoE’s rise, other lenders will increase their rates too. As such, you should be prepared for your repayment to go up in the next few months.
Tracker-rate mortgages work in a similar way, but they will track the BoE’s base rate. As a result, the November rise will affect the interest rate you pay.
If you currently have a fixed-rate mortgage deal in place, you will not be immediately affected by the BoE’s decision as the interest rate you pay is fixed. However, you could find that when your deal runs out, your new one will have a higher rate.
When choosing a new mortgage deal, one key consideration is whether to opt for a fixed-, variable-, or tracker-rate mortgage.
A fixed-rate mortgage could provide stability
A fixed-rate mortgage deal will fix the interest rate you pay for a defined period of time, such as two, three, or five years. During this period, your repayments would remain the same even if the base rate rises.
As a result, it could provide certainty and help you budget effectively. Homeowners who want the reassurance of knowing exactly how much their outgoings will be may find that a fixed-rate option suits them.
However, if base rates fell, you wouldn’t benefit from the interest rate on your mortgage decreasing, so the cost of borrowing might be higher overall.
A variable- or tracker-rate mortgage might save you money
As mentioned above, the interest rate you pay when you have a variable- or tracker-rate mortgage may change following a bank rate review.
When the bank rate goes up, your repayments and cost of borrowing are likely to rise too. Conversely, if the bank rates fall, you could benefit from your mortgage interest rate and repayments decreasing.
If you had a crystal ball that could accurately tell you when the bank rate will change, you’d be able to assess if a variable- or tracker-rate mortgage could save you money. However, in reality, numerous factors affect the MPC’s decision and it’s impossible to guarantee how the bank rate will change in the future.
So, you might choose a variable- or tracker-rate mortgage if you believe interest rates will remain stable or fall. However, you may benefit from assessing how a rise could affect your budget.
Talk to us about your mortgage
Ultimately, there’s no “right” answer when choosing between fixed-, variable-, and tracker-rate mortgages – it will depend on your financial circumstances and attitude to uncertainty.
If you have questions about your current mortgage or how to navigate finding a new deal, please get in touch. We could help you understand how your finances could be affected now and in the future.
Please note: This article is for general information only and does not constitute advice. The information is aimed at individuals only.
All information is correct at the time of writing and is subject to change in the future.
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