Homeowners are being hit with yet another price increase amid the cost of living crisis. The Bank of England has now raised interest rates to one per cent - the highest rate seen since 2009 during the recession.
Having gone up by another 0.25 per cent, this is now the fourth consecutive interest rate rise voted by members of the Bank’s Monetary Policy Committee, with a majority six votes to three to increase rates from 0.75% to 1%.
It is the first time the Bank has ever voted to raise rates four times in a row in the history of the MPC, going back to 1997. And it seems that the rates are set to keep on rising, hitting an expected 2.5% by the middle of next year, reports the Mirror.
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The interest rate hike is yet another blow for households who are paying off their mortgages. The 1% rise is expected to increase monthly repayments for millions of homeowners on variable rates mortgage deals and other forms of borrowing.
Brian Murphy, head of lending at Mortgage Advice Bureau explained: "Homeowners whose mortgages are directly linked to the bank rate may see an increase in monthly repayments.
"Those who are on lender revert rates or Standard Variable Rates (SVRs) will have to wait and see if their lender will pass on the rate increase in full or only in part.
"Those who have a tracker rate mortgage are more likely to see the rate passed on in full, and possibly as soon as their next mortgage payment.
"A fixed rate mortgage could provide a temporary safe haven against upcoming interest rate rises as their fixed interest rates are guaranteed for a set time period.
"If you’re re-mortgaging, make sure to speak to your lender about your mortgage terms as there may be exit fees or early repayment charges to consider."
The cost of living crisis as well as today's interest rate rise may make first-time buyers and those looking to buy a new home feel uneasy.
Simon Leadbetter, global CEO of Fine & Country, said: “Those most vulnerable to rising borrowing costs are new entrants to the market rather than existing homeowners.
“The recent boom in house prices means that even if the base rate continues to climb, many people coming off fixed rate deals might find themselves with improved loan-to-value brackets, something which may make them eligible for an even cheaper deal than the one they had before.
“With so many moving parts, trying to pinpoint the exact moment the market will cool is a big ask for even the most seasoned economist.
Simon continued: "Clearly, it’s unrealistic to expect growth to remain in the double digits forever, but the current supply bottlenecks suggest we may see elevated house price growth for some time to come.
"While it remains unclear how aggressive the Bank of England will be when it comes to further hikes later in the year, they need to get the right balance between combating inflation and supporting growth at a time when conflict in Europe has taken its toll on consumer confidence in the broader economy.
“This latest interest rate rise won’t magically bring an end to higher food and energy costs which have been triggered in large part by the war in Ukraine."
How worried are you about the cost of living crisis? Have your say in our comments below.
But Rightmove’s director of property Tim Bannister said it will take time for the rise in interest rates to feed through to the market.
"Despite further rises being a possibility this year, right now the data suggests this is not dampening the desire for people to move," he said.
"Despite economic headwinds such as the rise in cost of living, buyer demand is still up around 60% from the more normal 2019 market. The home and where we live has become even more fundamental for people over the last couple of years, meaning that even with economic challenges, people are still prioritising this decision.
"We do anticipate affordability constraints and these economic headwinds such as rising interest rates to have more of an effect on the market later in the year.
"People will need to make decisions around what they can afford, which may mean some people need to lower the property price bracket they are aiming for, assess the mortgage products available in terms of duration and fixed-rate length, or raise a higher deposit in order to borrow less.”
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