The Bank of England (BoE) has increased the base rate for the ninth time in a row, from 3% to 3.5%. This time last year, interest rates were 0.1%, but since then the BoE has introduced a series of hikes to try to combat spiralling inflation. The latest rise will see the average monthly mortgage repayment rise by £250, the BBC reports.
The majority of mortgage holders have a fixed rate mortgage so they won’t notice any immediate change. However, those with tracker mortgages and those coming to the end of their current deal can expect to be paying a much higher rate than they might have budgeted for.
The changes are expected to affect about four million households next year, and a further two million by 2025. Anyone who is coming to the end of their mortgage deal in the next six months is advised to contact a mortgage broker to help them shop around and lock in a new deal as early as possible.
Bank of England governor Andrew Bailey said in a letter to the Treasury: “Falling real incomes, increase in mortgage costs and higher unemployment will place significant pressure on household finances and weigh on their ability to service debt.”
Landlords with buy-to-let mortgages are thought to be among the worst affected group, because the majority have interest-only mortgages.
The BoE’s report said: “Were landlords to seek to offset the projected rise in buy-to-let mortgage costs, it was estimated they would need to increase their rental income by around 20%. This would increase the cost of housing for renters.”
The BoE have not ruled out further interest rate rises in the new year, in a bid to return inflation to the target level of 2%. Chancellor Jeremy Hunt commented: “High inflation, exacerbated by Putin’s war in Ukraine, continues to plague countries across the world, eating into people’s pay cheques and driving up food and energy prices.”
He added: “I know this is tough for people right now, but it is vital that we stick to our plan, working in lockstep with the Bank of England as they take action to return inflation to target.”
“The sooner we grip inflation the better. Any action which risks permanently embedding high prices into our economy will only prolong the pain for everyone, stunting any prospect of economic recovery.”
The economy is expected to go into recession throughout 2023, and house prices are predicted to fall by as much as 10%. Some financial analysts are forecasting that as the heat goes out of the housing market and the wider economy, inflation rates will start to ease and interest rates may also correspondingly start to ease.
This is more encouraging news for anyone hoping to get a new mortgage deal, either to remortgage or as a first-time buyer, as lenders will start introducing more competitive products back into the market. If you would like to speak to bad credit mortgage brokers please get in touch today.
Your home may be repossessed if you do not keep up with your mortgage repayments.
There may be a fee for mortgage advice. The actual amount you pay will depend on your circumstances. The fee is up to 1% but a typical fee is £595.
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Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it. There may be a fee for mortgage advice. The actual amount you pay will depend on your circumstances. The fee is up to 1% but a typical fee is £595.
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