First rate rise in a decade: what it means for you

Millions of borrowers pay more, starting now – but how will a higher Bank Rate affect other finances, asks Amelia Murray

Thursday’s 0.25 percentage point increase in the Bank of England’s leading Bank Rate – the first upward move since July 2007 – has had an immediate effect. Hundreds of thousands of borrowers, including those with certain types of loan from HSBC and Yorkshire and Clydesdale Banks, are already paying a higher mortgage rate.

Millions more will see rates tick up from December 1, which is when the majority of lenders plan to apply the increase.

In other areas of our personal finances – from overdrafts to credit cards, shares, savings and pensions – there are also far-reaching consequences, albeit in some cases less immediate.

Most borrowers’ deals fall into one of two camps. They either have a fixed-rate deal, where they pay a known, fixed rate for a set period (such as two or five years). Or they have a “variable rate” deal where the interest rate can move at the discretion of their lender.

If you are already on a fixed rate, nothing will change until you reach the end of that fixed-rate term.

However, if you are looking to get a new fixed-rate deal, you can expect rates to climb. The quicker you act, the better the rate you are likely to obtain.

As with all mortgages, the bigger your deposit (or the more equity you have) the better the rate you are likely to obtain.

The average two-year fixed rate for someone with a 5pc deposit has increased from 4.16pc a month ago to 4.26pc today. Six months ago the rate was at 4.14pc, according to data from personal finance website Moneyfacts.

By comparison, the average rate for someone with a 40pc deposit has only increased from 1.66pc to 1.69pc, and is still cheaper than six months ago. Read this explanation of fixed rate loans, which includes the current best buys.

Sometimes called “Bank Rate trackers” or “Base Rate trackers”, the rate you pay moves up and down exactly in line with the Bank of England’s Bank Rate. So, for example, you may have a