Mortgage borrowers whose deal directly tracks the base rate will see their payments increase by around £49 per month on average, adding up to nearly £600 annually, as a result of the Bank of England’s base rate hike announcement on Thursday.
The figures, from trade association UK Finance, also showed that a borrower sitting on their lender’s standard variable rate (SVR) will typically see a monthly increase of just under £31, adding up to around £370 per year. Nearly four-fifths (78%) of residential mortgages outstanding are fixed rates, meaning these borrowers will not see the immediate impact of the base rate hike from 1.75% to 2.25% - the highest level since November 2008.
But, if they have been safely locked into their home loan for a while, they may find they get a bill shock when they do eventually re-mortgage. Something Money Saving Expert founder, Martin Lewis, shared with viewers on his Money Show Live TV Show this week.
The consumer champion warned mortgage holders to be aware of what they need to do in a few months’ time once their fixed-rate period ends.
He told viewers: “In a nutshell, if you’re on a fixed-rate mortgage nothing happens now but you need to know when your fix ends as you’re going to be paying a lot more than you were and you need to start budgeting and preparing for that now.
“Put a date in your diary six months before your fix ends and be ready to start trying to find the cheapest deal that you possibly can from that point onwards.”
The financial journalist also warned savers that the rates rise will impact the return on their funds and urged people to wait a few days to let the dust settle before trying to find the best deal for their money if the rate is below 2%.
He said: “Wait a couple of days while everything is factored in and then at the beginning of next week, check your savings rate.
“If it’s less than 2%, you want to check if you can get a better deal and ‘ditch and switch’ - don’t let your money languish in a low-paying account.”
The latest hike could also make it more of a struggle for first-time buyers to get on the property ladder, adding to the rising cost of raising a deposit.
According to property website Rightmove, first-time buyers typically face scraping together £22,409 if they want to raise a 10% deposit on a home, up from £14,135 10 years ago.
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