Martin Lewis warns savers ‘be prepared to switch banks’ after interest rate hike

·2-min read

Martin Lewis has issued a warning to savers that they should be prepared to switch banks as interest rates have risen by 0.5 per cent.

It comes as the Bank of England (BoE) has said the UK interest rate is now at its highest level since the 2008 financial crisis and indicated that the country is already in a recession, as it expects a 0.1 per cent fall in GDP over the current quarter.

Martin Lewis warns savers 'be prepared to switch banks' after interest rate hike (PA)
Martin Lewis warns savers 'be prepared to switch banks' after interest rate hike (PA)

Posting on Twitter, the founder of MoneySavingExpert (MSE) said: “Bank of England’s just increased UK base rates by 0.5% points from 1.75% to 2.25%. Highest since ‘08

“FIXED MORTGAGE no change til it ends, then new fix’ll be much costlier VARIABLE MORTGAGE c£25/mth rise per £100k mortgage SAVINGS many won’t pass rise on, be prepared to switch.”

Mortgage borrowers whose deal directly tracks the base rate will see their payments increase by around £49 per month on average, adding up to nearly £600 annually, as a result of Thursday’s base rate hike.

The figures, from trade association UK Finance, also showed that a borrower sitting on their lender’s standard variable rate (SVR) will typically see a monthly increase of just under £31, adding up to around £370 per year.

Nearly four-fifths of residential mortgages outstanding are fixed rates, meaning these borrowers will not see the immediate impact of the Bank of England’s base rate hike on Thursday from 1.75 per cent to 2.25 per cent - the highest level since November 2008.

But, if they have been safely locked into their home loan for a while, they may find they get a bill shock when they do eventually re-mortgage.

 (PA Archive)
(PA Archive)

Tim Bannister, Rightmove’s housing expert, said: “It’s likely that those who choose to fix again will find that rates have doubled in some cases since they last locked in, and so despite paying down some of their debt they could find their new monthly mortgage payments are higher, even if they’ve moved into a lower LTV (loan-to-value) bracket and have built up equity.

“They will now face the tough decision of moving to a tracker mortgage in the hope that interest rates drop again soon, or taking another fixed deal for a bit more certainty on their outgoings.”