Millions of homeowners across the UK are bracing themselves for a rise in their mortgage bills after the Bank of England increased interest rates to 3%.
The base rate is rising from 2.25% to 3% - the biggest interest rate rise since 1989. The decision was made by the Bank on Thursday in a bid to control inflation amid the crippling cost of living crisis.
The 0.75% increase is expected to raise monthly mortgage repayments for those who are on variable rate mortgage deals and other forms of borrowing. Mortgage rates soared in September after the mini-budget was delivered by former Chancellor, Kwasi Kwarteng, while former Prime Minister Liz Truss was in power.
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After this many lenders began pulling their mortgage products from the market as they needed time to reprice them. It is now thought the latest interest rate rise will create panic and anxiety throughout the property market once again, reports the Manchester Evening News.
Jonathan Samuels, CEO of Octane Capital, said: "While the mortgage market has settled in recent weeks, today’s latest base rate hike will certainly sow more seeds of panic amongst the nation’s homebuyers and who can blame them after witnessing the largest single increase since 1989. The average homebuyer opting for a variable rate mortgage can expect to see the cost of their monthly repayment increase by around £166 per month as a result of today’s increase.
"Those currently coming to the end of a three-year fixed mortgage will also see an increase as they look to secure another fixed term, with their monthly repayment increasing by an estimated £257 per month, despite having cleared a substantial chunk from their original loan."
Bradley Post, CEO of RIFT Tax Refunds, added: "Today’s decision will only add to the existing anxiety caused by the current cost of living crisis that has engulfed many households in recent months. As a result, those who are already stretched financially thin are now facing a further squeeze on their monthly earnings, as the cost of everything from our mortgage repayments, overdrafts loans and credit cards is set to climb.
"Unfortunately, there isn’t a great deal that can be done to ease these increased costs, other than tightening our belts where our borrowing habits are concerned. Of course, for the vast majority, the belt simply can’t get any tighter, whilst many more have no other choice but to utilise overdrafts and credit cards simply to get by from one month to the next."
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