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More than two million households face increased mortgage payments after the latest Bank of England interest rate rise, which experts say could create more “mortgage prisoners”.
The Bank rate rose from 1% to 1.25% in a bid to tackle rising inflation.
Borrowers who have variable mortgage rates – those that move in line with the Bank rate – will see their monthly repayments go up.
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For those on standard variable rates, the average annual increase will be £191, while for tracker deals the figure is £303, according to industry body UK Finance.
The increase affects a quarter of mortgage borrowers, which translates to about 2.25 million homes.
The average monthly mortgage payment for those on standard variable rates has gone up by £90 since the Bank of England started increasing its interest rate from a low of 0.1% in December 2021.
This amounts to an extra £1,080 a year, affecting an estimated one million households.
For more than 800,000 borrowers on tracker deals, the increase has been an average of £57 a month, or £684 a year.
How those on fixed rates will be affected
Homeowners on fixed rate deals will only be affected by rising Bank rate levels when they come to find a new deal towards the end of their fixed term, which usually lasts two or five years.
The number of deals ending this year is 1.3 million, according to UK Finance.
Jenny Ross, money editor at Which?, said those on variable rates should consider switching to a fixed deal now as they may find more competitive rates and could protect themselves from any future rate rises.
“Time is of the essence, though, as mortgage rates have been creeping up recently and are likely to carry on doing so,” she told Sky News.
The average interest rate for a two-year fixed term mortgage deal has increased from 2.34% at the beginning of December to 3.25%, according to Moneyfacts, a price comparison site.
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Source : skynews
