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What is the Bank of England Base Rate?

It is the official Bank Rate set by the Bank of England and it influences the interest rates set by Banks, Building Societies and other financial institutions.

If you are currently finding it difficult to pay your mortgage and believe you may be facing into financial difficulties please don’t ignore the problem, there are ways we can help.

Your mortgage repayments

When the Bank Rate changes this could affect your mortgage payments.

If you have a tracker mortgage that directly tracks the Bank of England Base Rate, the interest rate we charge you will always move in line with changes to the Bank Rate.

If you are paying interest at TMB standard variable rate, your mortgage payments are likely to be affected by a change to the Bank Rate. It’s important to note that the changes we make to our standard variable rate may not change in line with or at the same time as the change to the Bank Rate, as other factors can also influence the rates that we set.

If you have a fixed rate mortgage, a change in the Bank Rate will not affect the fixed interest rate during the fixed rate period. However, the interest rate you move to after the fixed rate period ends (the lender variable rate) is variable and therefore could be subject to changes in the Bank Rate.

If part of your mortgage is on a fixed rate and part on a variable rate, any interest rate change will only affect the part of your mortgage on a variable rate.

To help you understand how a change in interest rates might affect your monthly payment, use our Rate Change Calculator to get an idea.

Planning ahead

While the Bank of England Base Rate remains low you may want to consider making additional payments to your mortgage. Making additional payments will reduce the amount you owe and the amount of interest we charge, it could also reduce the impact of future interest rate increases on your mortgage payments. This is because when we work out your new monthly payment we base it on your current mortgage balance, which includes any overpayments you have made. This means the increase in your monthly payment will be less than if you had not made any additional payments. To find out if any additional payments will be subject to an early repayment charge you should check your mortgage offer document.

Although TMB are no longer accepting new mortgage applications for new borrowing, additional borrowing or to change your product, if you would like to make a change to your existing mortgage you can contact:

  • us on 0345 725 3253
  • your mortgage broker or
  • an Independent Financial Adviser

Next steps following a change to the Bank of England Bank Rate

  • Firstly we’ll review our standard variable rate and decide what changes we will be making
  • For our existing mortgage customers any change in interest rate will usually take effect from the 1st of the month following the Bank of England’s announcement
  • If your mortgage is affected we will write to you to tell you about the change to your interest rate and monthly payment ahead of your monthly payment due date.

FAQs

WHAT HAPPENS WHEN THE BANK OF ENGLAND ANNOUNCE A RATE CHANGE?

If your mortgage is affected we will write to you to tell you about the change to your interest rate and monthly payment ahead of your monthly payment due date.

We’ll change the interest rate on tracker rate mortgages with effect from 1st of the month following a Bank of England change.

HOW IS MY NEW MONTHLY PAYMENT CALCULATED?

Where your mortgage is made up of sub-accounts, we look at each sub-account separately and change the monthly payment only on sub-accounts affected by the change. This may mean that some and not all sub-accounts get a monthly payment recalculation.

For a repayment mortgage, your new monthly payment is calculated to ensure that you repay everything you owe, including interest, by the end of the mortgage term. This means we recalculate your payment based on the amount you owe on the day we do the recalculation, together with the projected interest charges to the end of the month. Taking into account any interest rate change and using the number of monthly payments you have yet to pay before the end of your term, we then work out what the new payment should be.

For interest-only mortgages, you pay only interest during the term of your mortgage and pay a lump sum at the end of the term to pay off everything else you owe. To calculate your monthly payment, we take the amount you owe on the day we do the recalculation together with projected interest charges to the end of the month. We then calculate a monthly payment at a level that pays the interest-only on this amount taking into account any interest rate change.

Where part of your mortgage is repayment and part interest only, each method will apply to the part concerned.

WHY IS MY MONTHLY PAYMENT GOING UP WHEN THE INTEREST RATE IS COMING DOWN?

Although the rate of interest you are being charged is reducing, your monthly payment may be going up because you now owe more than you did when we last recalculated your monthly payment. This might be because you have missed one or more of your monthly payments (your mortgage is in arrears). Alternatively, you may have arranged to underpay, or we may have added a cost or charge to your mortgage and you haven’t made arrangements to pay it off. The new monthly payment has been calculated to reflect the current mortgage balance and to ensure that you pay everything you need to pay by the end of the mortgage term. You will still benefit from the interest rate reduction as although the payment is going up, the interest rate we charge on the relevant part of your mortgage will be lower.

WHAT IF PART, OR ALL, OF MY MORTGAGE IS ON A FIXED RATE?

If your mortgage is on a fixed rate of interest, then the interest rate on the part that is fixed won’t change. For most customers, the monthly payment won’t change either. When the fixed rate comes to an end, we will calculate a new monthly payment at the new variable interest rate that applies at that time.

MY MORTGAGE IS ON A FIXED RATE SO WHY HAVE YOU CHANGED MY MONTHLY PAYMENT?

If your mortgage account number starts with an ‘A’ or if you have opted for a Customer Payment Allocation, then although your interest rate hasn’t changed, we have recalculated your monthly payment so that it repays your mortgage (where it is on repayment) or the interest charges on your mortgage (where it is interest only) by the end of the mortgage term. If your payment has changed, this is because the amount you now owe is now higher or lower than it was at the time that you moved onto the fixed rate.

WHAT IF I FIND IT DIFFICULT TO PAY MY MORTGAGE?

If you are currently finding it difficult to pay your mortgage and believe you may be facing into financial difficulties please don’t ignore the problem, there are ways we can help.