MORTGAGE rates are already soaring after the the Bank of England hiked interest rates to 1.75% yesterday.
The hike to the base rate of interest is the steepest rise seen in over 27 years.
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The Bank of England increased the base rate of interest by 0.5 percentage points.
The base rate of interest was at a historic low of 0.1% during the pandemic, but has since been increased six times as the Bank tries to tackle inflation.
And anyone on a variable or tracker mortgage will be the first to feel the effects of the increase.
These mortgages are linked to the Bank’s base rate – so when it goes up, so do your monthly repayments.
There are around 1.9million homeowners with these mortgages.
The latest hike is expected to add £888 a year on to their repayments.
That’s based on a £250,000 mortgage with a 25-year term, according to figures from broker L&C Mortgages.
But for many people, the impact will be even greater.
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The bigger your mortgage, the more your repayments will go up when interest rates rise.
Those looking to get a new fixed rate mortgage will also be affected – average interest rates on a two-year deal have gone up as much as 166%.
How much will my mortgage payments go up by?
Exactly how much you pay will depend on your mortgage deal, the size of your loan, and your mortgage term.
According to L&C, a typical variable mortgage rate was 4.74% when the Bank of England’s base rate was 1.25% before today’s rise.
On a 25-year £100,000 mortgage, that means monthly repayments of £569.
But with base rate at 1.75%, monthly payments will shoot up to £598.
That’s £29 extra a month, or £349 more a year.
Laura Suter, head of personal finance at AJ Bell, said: “We’re odds-on to see the biggest increase in interest rates since 1995 as it’s widely expected that the rate setters will hike rates by 0.5 percentage points.
“The move by the Bank will pile more misery on the 1.9million people with variable rate mortgages as they battle the rising cost of living.”
If your mortgage is bigger, you’ll feel the effects even more.
Monthly repayments on a £250,000 variable mortgage will rise from an average of £1,424 to £1,496 after the rate hike – an extra £873 a year.
Those with a £400,000 variable mortgage will see repayments rise from £2,278 a month to £2,394 – an extra £1,397 a year.
“Borrowers will have been braced for another base rate rise, as the Bank attempts to put the brakes on soaring inflation,” said David Hollingworth, associate director at L&C Mortgages.
“That will mean another cost increase for homeowners on variable rates, alongside all the other cost of living rises hitting monthly budgets.”
Have any lenders confirmed rate rises?
So far, HSBC and First Direct have confirmed that their standard variable mortgage rates will remain at their current levels for the time being – priced at 4.45%.
Santander announced hours after base rise that it’d be hiking its standard variable rates by 0.50%. This change will also affect all Alliance and Leicester mortgages and with rate rising from 5.49% to 5.99% at the beginning of September.
