The Bank of England has once again made the decision to raise interest rates, with the base rate now at 4.25 percent. The decision was made by the Monetary Policy Committee today (March 23) who voted by a majority of 7-2.
This is now the 11th consecutive time that the Bank has chosen to hike interest rates in the hopes of controlling inflation. The last announcement in February this year saw the base rate rise to 4 percent, which has now gone up by another 0.25 percent.
The base rate of 4.25 percent is now the highest level the UK has seen since October 2008. The increased rate is likely to cause concern amongst homeowners, as experts have now warned that more than a million mortgage holders are likely to be affected.
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The Bank's interest rates have a direct affect on those who own a property, and how much you are impacted depends on which type of mortgage you have.
Experts warn that it is homeowners who are on a tracker and variable rate mortgage who will be worst hit by the increased rate, as they must be prepared for their monthly repayments to go up.
David Hannah, property expert of Cornerstone Tax, explained: "The rate was already at its highest level for 14 years and now the impact of this rate rise is set to be felt by borrowers as mortgage and loan costs are set to be higher.
"When interest rates rise, around 1.6 million people on tracker and variable rate deals will see an immediate increase in their monthly payments.
"The increase of 0.25 percentage points today means that homeowners on a typical tracker mortgage would pay around £24 more a month as those on standard variable rate mortgages face a £15 increase."
David added: "In the short term, today’s announcement from the Bank of England to increase interest rates by 0.25 percentage points to 4.25% will have a detrimental impact on those who are currently on variable mortgages, and it may lead to people running into genuine financial difficulty.
"It is also set to affect first-time buyers who may now be unable to make a first step onto the housing ladder due to unaffordable mortgage rates. This will also be a cause for concern for those who are coming to the end of a fixed-term deal as their repayments will also increase."
The interest rate rise will also likely have an effect on tenants who rent their properties as competition will become even more fierce.
"Today’s announcement will have a knock-on effect on the rental market too – it has already been suffering from a lack of supply, and now, with a growing number of would-be buyers in need of a place to live, this is going to be exacerbated further," David explained.
"The result of this is that rental prices and competition will likely increase at a time when people are already struggling.
"With all of this said, my outlook for the second half of this year is much more positive and I think mortgage rates will fall alongside inflation which should bring affordability back to more normal levels.”
Agreeing that it will be first-time buyers who are likely to be hit the hardest, Nigel Purves, CEO of Wayhome said: "We’ve already seen how increasing interest rates have brought uncertainty to the mortgage sector and it’s the nation’s first-time buyers who have been hit hardest in this respect.
"Not only are they facing the tough task of accumulating a deposit on the ever increasing cost of a home, but the number of higher loan to value products has also reduced, while the monthly cost of repaying a mortgage has climbed.
"It’s a bleak outlook, to say the least, and one that will be all the bleaker following today’s decision.”
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