Potential impact on mortgage rates as interest rates rise to 4.5%

The Bank of England (BoE) recently announced a 0.25% increase in the Base Rate, marking the twelfth consecutive rise and pushing interest rates to a 15-year high of 4.5%. The objective behind these consistent rate hikes is to address the persistent high levels of inflation, which stood unexpectedly high at 10.1% in the year ending March, surpassing the government’s target of 2%.

While the inflation rate remains above the target, the Bank’s analysis of the UK economy, released alongside the interest rate decision, predicts a rapid decline in inflation. It is projected to fall to around 5% by the end of this year and align with the 2% target by late 2024. However, the Bank acknowledges that certain items, particularly food, may experience faster price increases, although it expects energy bills to decrease due to recent declines in gas prices.

If you’re thinking of moving, renting or buying, and want some home inspiration take some time to browse our properties available in Virginia Water and the surrounding areas. If you have any questions, you can also visit our award-winning website or call us on 01344 843000 and email us.


The Bank’s outlook aligns with financial market forecasts, which anticipate the Base Rate peaking at around 4.75% in the autumn. Barring any unforeseen shocks to the economy, it is likely that interest rates will remain at or around the current level for an extended period before gradually declining.

Over the past few weeks, average fixed-rate mortgage rates have been gradually increasing in anticipation of the Base Rate reaching 4.5%. Lenders take the Base Rate into account when setting their fixed-rate mortgage offerings, which are determined by market expectations of future Base Rate levels over different timeframes, known as “swap rates.”

According to Rightmove’s mortgage expert, Matt Smith, immediate changes in lender rates are unlikely as a result of the recent decision. Lenders are likely to adopt a cautious approach and wait to see how the Bank’s economic outlook affects swap rates. The current average rate for a five-year fixed 85% Loan-To-Value (LTV) mortgage is 4.52%, up from 4.44% last week.

Matt also highlights that while there may be some fluctuations in fixed-rate deals in the short term, homebuyers entering the market soon may not experience significant changes in their monthly repayment amounts. For instance, for someone purchasing an average property and spreading the cost over 25 years, the difference amounts to approximately £14 per month.

It’s important to consider the impact on first-time buyers as well. Demand from this group has surpassed pre-pandemic levels, and lenders are expected to adopt competitive strategies to meet this demand. Lenders are exploring innovative approaches, such as the recent launch of Skipton Building Society’s 100% mortgage product, aimed at assisting specific segments of the first-time buyer market. Such initiatives can help overcome affordability challenges faced by many first-time buyers.

For existing mortgage holders, changes in the Base Rate can affect the interest paid on loans. Those with fixed-rate mortgage agreements will not see any changes in their monthly payments until the end of their term. However, individuals with variable or tracker mortgages should anticipate an increase in their monthly payments.

Homeowners with tracker mortgages may find this latest news disappointing, as they may have believed that the Base Rate had already peaked in March. This rate rise introduces an additional cost that needs to be incorporated into their monthly budget when the full rate increase is implemented.

For more information about interest rates and the Bank Base Rate visit:  https://www.rightmove.co.uk/guides/buyer/mortgages-and-financing/interest-rates/

Looking ahead, the Bank of England’s next interest rate announcement is scheduled for Thursday, 22 June.

The dates of interest rate announcements in 2023 are:

  • Thursday 2 February
  • Thursday 23 March
  • Thursday 11 May
  • Thursday 22 June
  • Thursday 3 August
  • Thursday 21 September
  • Thursday 2 November
  • Thursday 14 December


The driving force behind moving should be that buying property is a medium to long term investment, especially as statistically any home owner who has had their home for 10years or more will have seen a significant increase in the value of their property. The current situation where economic factors are pushing up rates to combat inflation shouldn’t be seen as a barrier to making a property purchase. The wider economic backdrop can move fast.

If you are thinking of moving, experts have said don’t put a hold on your plans as buying a home with a mortgage can take anywhere between 3 to 9 months and a lot can change in that time.

We are seeing many buyers moving very quickly and homes selling and completing in just a couple of months. The number of buyers’ vs property available in the area is still high with most competing on price to secure their next home in time for summer.


If you are thinking of moving in or out of the area, make sure you take a look at our amazing catalogue of properties for sale in Virginia Water and the surrounding areas. If you’d like to speak to someone about properties to let in Virginia Water, a member of our expert team would be happy to help. You can call us on 01344 843000 or email us. You can also follow us on FacebookTwitterInstagram, and LinkedIn.