Place your bets for base rate roulette

With borrowers on tenterhooks next week before they find out whether the cost of their mortgage is going to increase, Legal & General takes a look at the likelihood of a Base Rate change in any given month.

Over the past 30 years, there have been 58 increases in the main Bank of England rate of interest. During this time, the rate has changed its name and classification several times, now being termed the ‘Official Bank Rate’, which is the rate paid on commercial bank reserves.

Bank of England Base Rate facts:

The highest rate in the past 30 years was 17% in 1979
The lowest rate was 3.5% in 2003
The difference in monthly payments on a £100,000 mortgage between these two rates would be £937!
August is the most likely month for a change, whether that be an increase or a decrease

Stephen Smith, Director of Housing at Legal & General said: “Borrowers will be waiting to see if they are going to be in the red or the black in the base rate roulette next week. Rates are still at a relatively low level compared to 70’s and 80’s, and many people would struggle with today’s debts at yesterday’s prices. Whilst the boom and bust has flattened out since the turn of the Millennium, borrowers are still facing a probable hike in rates in the near future.

“The months of June and August are the most likely time of year for a rise in rates. They are a bit like Park Lane and Mayfair on a Monopoly board, because you just want to get through them without having to pay out more money!”

There have been many more cuts in the Base Rate than rises. During 1982 there were 34 cuts alone, with eight each in July and August. However, since 1992 the Base Rate has not changed more frequently than once a month. Between August 2004 and August 2006 there were only two changes.

The Base Rate is currently 5.25%. If it were to increase by 0.25% next week, it would cost an extra £15 a month on a £100,000 mortgage.