The mortgage cost of the latest base rate rise

People on variable rate mortgages need to tighten their belts another notch with today’s increase adding to their costs, analysis from Hargreaves Lansdown shows.

Someone with a £300,000, 25-year repayment mortgage on the average SVR could see their monthly payments go up by over £88 a month.

Three quarters of mortgage holders are protected by a fixed rate deal, so the rises will take a while to filter through.

However many will see a steep rise in their payments when they remortgage.

Average two- and five-year rates were already rising at a record pace, according to Moneyfacts, and this will add more fuel to the fire.

The current average two-year fixed rate deal in early July was 3.74%, up 1.4 percentage points from November and the average five-year fixed rate mortgage was 3.89%, up 1.25 percentage points.

Both had risen more than the 1.15 percentage point bump in the base rate. 

However not all mortgages are rising as quickly as the Bank of England base rate, because the big banks are still sitting on so much lockdown savings that they can afford to fund cheaper deals.

Therefore there’s a possibility of mitigating some of the effects of the base rate rise if you scour the market or use a broker to do so on your behalf.

Brian Murphy, head of lending at Mortgage Advice Bureau, said: “Cheaper mortgage products are… dwindling, meaning home buyers are being left with more expensive options and either racing to lock into a rate or curtailing demand altogether as it challenges buyer affordability.

“New and existing borrowers should seriously consider locking a fixed term deal to protect them from any further rate rises. With economists predicting inflation to soar even higher, interest rates may well follow suit for a while longer.

“Approximately 2 million people are on variable rate mortgages and will subsequently see an immediate impact on their monthly mortgage repayments.

“While those on fixed rate deals will be sheltered from interest rate rises for the duration of their mortgage term, around half are expected to expire in the next two years.

“Some may therefore consider lengthening their mortgage terms or even overpay on their mortgage to help them with payments over the long term. Speaking to a whole of market mortgage broker, however, can help figure out the best options based on your personal circumstances.”

Tom Bill, head of UK residential research at Knight Frank, predicted that negligible monthly declines in house price growth will get steeper in the months ahead.

He added: “Mortgages have become noticeably more expensive in recent months, which will dampen demand as cheaper offers made earlier this year expire and people roll off fixed-rate deals.”


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