Millions of homeowners face paying thousands of pounds more on their mortgage if the Bank of England hikes interest rates again today.
Money markets suggest the Bank could raise rates to 2.5% this afternoon in what would be the biggest rise in 33 years.
This would be bad news for anyone with a tracker mortgage - as these types of deals move in line with the base rate.
If you're on a standard variable rate (SVR) mortgage, then you'll likely see your rates go up as well.
It is down to your lender to decide whether to pass on the increase and most do decide to do this.
If you’re on a fixed-rate mortgage, the rate rise won’t affect your monthly bill until your current deal expires.
This means you're protected for now - but you could still end up paying more when you come to remortgage as rates continue to rise.
You'll usually be on an SVR type mortgage deal after your fix or tracker rate ends.
How an interest rate hike could affect your mortgage
Experts at TotallyMoney and Moneycomms have calculated the impact of the expected interest rate hike could have on the 2.2million homeowners without a fixed rate mortgage deal.
The base rate is currently set at 1.75% - so an increase to 2.5% would be a hike of 0.75 percentage points.
For the average UK property costing £270,708 with a 75% LTV (loan-to-value) mortgage, a 0.75 percentage point hike this week means a monthly mortgage repayment increase of £78.
It also means these homeowners with a variable rate deal will be forking out an extra £274 each month compared to repayments in 2021.
Here is how much a 0.75 percentage point rate hike could add to your monthly mortgage repayments:
- £150,000 mortgage - £56
- £250,000 mortgage - £93
- £400,000 mortgage - £153
Here is how much extra you would be paying a month, compared to November 2021:
- £150,000 mortgage - £189
- £250,000 mortgage - £315
- £400,000 mortgage - £505
Alastair Douglas, CEO of TotallyMoney said: “Another increase to the base rate will pile pressure on the finances of over two million homeowners who may already be struggling with the soaring cost of living.
“With inflation currently sitting at almost five times the Bank of England’s 2% target, it’s clear that something needs to be done — but is this the way?
“The latest interest rate hike is being closely followed by a new, higher energy price cap, further compounding pressure just as we head into the cold winter months.
“People’s finances are being squeezed more than ever and the Government, regulators, lenders and fintechs need to act quickly to protect people from being pushed to the edge as they risk missing repayments and potentially losing their homes.“
How to check if you can save money on your mortgage
If you're on a variable rate mortgage, you may want to check if you can save money by locking into a fixed-rate deal now.
Keep in mind that banks have been slowly increasing their rates since November in anticipation of future rate hikes - so deals aren't as cheap as they used to be.
If you're on a tracker mortgage, you should also compare prices - but do check if there are penalties if you leave your current deal now.
If you do have early repayment charges, you'll either need to wait for your initial deal term to run out, or pay the charge to leave early.
Borrowers should use a mortgage comparison to check whether you are on the cheapest deal - we've got a guide on how to find the best rates here.
If you're in a fixed-rate deal, you should start sorting a new deal soon if yours is coming to an end.
Some lenders allow you to lock in up to six months in advance, while most will allow by at least three months.
