Martin Lewis has issued a warning to everyone with a mortgage and savings account after the Bank of England hiked interest rates for the eighth time in a row on Thursday. The Bank’s base rate has now increased to 3% from 2.25%, its highest for 14 years.
The consumer champion took to social media shortly after the announcement to offer immediate insight and warn variable and tracker rate mortgage payers they can expect to see their payments increase by £40 per month/ £480 per year for every £100,000 of their mortgage. He also warned people with a savings account that most of the big banks “will continue to pay diddly squat, so ditch and switch”.
The Bank of England also warned that the interest rate hike could add around £3,000 per year to mortgage bills for those households that are set to renew existing fixed rate. It said the UK could be on course for the longest recession since reliable records began in the 1920s.
Posting on Twitter to his 1.9 million followers about the impact on mortgage payments, the founder of MoneySavingExpert.com wrote: “Bank of England has increased base rates by 0.75% points to 3%. Variable/tracker rate mortgages will rise by roughly £40/mth (£480/yr) per £100,000 of mortgage.
“Existing fixes won't change, but when they end new deals will be far costlier.”
Commenting on the impact for savers, Martin said: “Top paying easy access savings accounts will likely rise but it can take a month. Most big bank savings will continue to pay diddly squat, so ditch and switch.
“The jury's out on if top fixed savings will rise much or if this rise has already been baked in. I’ll keep you updated.”
In a press conference following the rates decision, Governor of the Bank of England, Andrew Bailey, said that things would get worse for all Britons if the Bank did not raise interest rates, which could hit mortgage-holders by £3,000 a year.
He said: “We do understand the difficulties of the situation we’re in and the difficulties mortgage-holders face.
“If we don’t take action to get inflation down, things will get worse.”
He added that there was “no easy outcome to this”.
“What we have announced today should not lead to higher mortgage rates, I think there is a downside to mortgage rates in that sense,” he said, adding that the market expects mortgage rates to drop.
Commenting on the increase, Citizens Advice Scotland’s Financial Health spokesperson Myles Fitt, said: “The hits just keep on coming for people’s finances and household budgets. Today’s announcement will lead to higher mortgage payments for many along with more expensive debt repayments.
“And this is on top of increases in energy bills, petrol costs, food and other living costs while wages stagnate, so it is little wonder CABS are seeing increasing numbers of people who are just unable to cope.
“Our online advice page on mortgages had seen an increase of nearly 300% from the same period last year. Today’s announcement is going to make this problem a whole lot worse for homeowners across the country - the cost of living crisis isn’t so much squeezing people’s financial wellbeing, it’s crushing it.”
He continued: “We call on the Chancellor to recognise in his upcoming Budget that more support is urgently needed for households in or at risk of financial distress.”
Anyone who needs help with their finances can get free, confidential advice from their local CAB, or from the income maximisation self-help tool www.moneymap.scot.
To keep up to date with the latest cost of living news, join our Money Saving Scotland Facebook page here, or subscribe to our newsletter which goes out three times each week - sign up here.
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