What is the Bank of England base rate and are interest rates going up?

THE BANK of England (BoE) sets the base rate which influences the cost banks charge people to borrow money or pay on their savings.

Are rates going up, down, or staying the same? Here's everything you need to know.

What is the Bank of England base rate and are rates going up?

The BoE base rate is sometimes just known as the Bank rate.

It determines the interest rate the BoE pays to commercial banks that hold money with it.

As a result this directly influences how much interest banks will charge on loans or pay out for savings.

The Bank Rate is set by the BoE's Monetary Policy Committee and remains at 5.25% as of November 2.

The committee opted to keep its base rate the same for the second time in a row.

When the BoE lowers interest rates consumers tend to increase spending, while lowering them has the opposite effect.

Increasing interest rates is like a lever for slowing down inflation - but it means the cost of borrowing increases.

This means that consumers and businesses have less money to spend, and in theory, as demand for goods and services falls, so should prices.

The bank is tasked with keeping inflation at 2% and hiking interest rates is a way of trying to reach this target.

What does it mean for my finances?

Any change in the base rate can have a knock-on effect on your personal loans, mortgages and savings.

Usually, any rise means your mortgage repayments will increase either immediately or after your term ends if you're on a fixed-term loan.

However, because the BoE has opted to freeze current rates, your lender may opt to do nothing at all for now.

Either way, your bank should warn you of any increase to your rate before it goes up.

Nothing is likely to change when it comes to credit cards and personal loan rates either.

However, you can still cancel a credit card if you want and will have 60 days to pay off any outstanding balance.

Meanwhile, savings rates will likely stagnate for now.

However, if you are currently on a low-rate easy-access savings account, you could find it's worth looking around for a better rate.

Alice Haines, personal finance analyst at Bestinvest, said: "While saving rates have been jumping up in recent months as lenders compete for new customers, a rate pause could change the course of direction so now might be the time to nab a fresh fixed-rate deal before the best offers disappear."

What mortgage help is available?

Despite the pause on the base rate, you might still be struggling to pay off your mortgage. But there is help at hand.

More than 30 lenders have signed up to a new mortgage charter to offer struggling households more support.

But the measures are meant to provide breathing space for struggling homeowners.

Customers approaching the end of a fixed-rate deal now have the chance to lock in a deal up to six months ahead.

Homeowners can request a better deal with their lender right up until their new term starts if one is available.

Plus, any homeowner will be able to approach their lender for advice on repayments without impacting their credit score.

Homeowners will be able to change their mortgage to interest only and extend the terms of their loan.

This change will also have no impact on the homeowner's credit score.

As soon as you think you will have a problem with your monthly mortgage repayment - whether you can’t pay anything, can't pay all of your monthly payment or can’t pay it on time - get in touch with your lender straight away.

They have certain schemes in place to help you if you're struggling.

You can ask your lender about the breathing space scheme if you're finding payments unaffordable.

Under the breathing space scheme, none of your debts will earn interest and no fees will be added for 60 days.

You'll be protected from debt collectors and bailiffs.

You may also be able to apply for a payment holiday - this is when you don't need to pay anything.

However interest and charges may continue to be added, and missed payments will need to be made up in the future.

Every company has a different policy so you'll need to get in touch to find out what support is available to you.

Many local councils have welfare assistance schemes to help struggling families.

Help available varies, but you could get free cash, food vouchers, and help for bills like rent and energy.

Check with your council to see whether you are eligible and what you can claim.

The Household Support Fund (HSF) is another scheme available through your local council.

It's designed to help those in most need with payments towards the rising cost of food, energy, and water bills.

Check with your council directly to see what's on offer as some share money with charities which can then give you cash or food vouchers.

Some councils restrict how often you can apply for money through this scheme to once a year, so double-check.

Support for mortgage interest or SMI helps those on Universal Credit - and other benefits - by giving them a low-interest loan.

The help goes towards mortgage payments or towards loans taken out to help repair any damage to the home.

SMI is a loan that you will need to repay with interest when you sell your home.

You'll get help paying the interest on up to £200,000 of your loan or mortgage.

But you'll only get up to £100,000 if you're getting Pension Credit.

The interest added to the loan can go up or down, but the rate will not change more than twice a year - the current rate is 3.03%.

Contact the office that pays your benefit to find out if you could get an SMI loan.

Do you have a money problem that needs sorting? Get in touch by emailing money-sm@news.co.uk.

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