The latest rates increase by the Bank of England will add almost £1,000 a year onto average home loans, according to data from Trussle.
The online mortgage broker says the Bank’s interest rates increase today to 0.75% from 0.5%, will add a further £316.56 to average home payments on standard variable rates.
It says the central two previous rate hikes since December, when rates stood at a historic 0.1% low, have already lifted mortgage payments by £650.04, bringing total extra costs to £972.60 over a year.
The broker says “the most immediate impact” will be to homeowners on SVRs, as these mortgages track interest rates month-to-month. It adds some 800,000 households have expired mortgages that use SVRs.
The firm adds that the rise will also impact homeowners who took out two-year fixed-rate mortgages during the stamp duty holiday and are now nearing the end of their mortgage terms.
The Bank’s Monetary Policy Committee voted 8-1 for the hike, the highest level since March 2020, when pandemic restrictions began.
The committee also revised up its assumptions last month that inflation, currently at 5.5%, would peak in April at 7.25%, due to the war between Russia and Ukraine, which is pushing up energy, food and other costs.
Prices rising by 5.5% in the year to January is the fastest rate for 30 years. The current level of inflation is well above the Bank’s 2% target.
The MPC now says: It adds: “Inflation is expected to increase further in coming months, to around 8% in the second quarter of 2022, and perhaps even higher later this year.”
It also warned that inflation could hit double-digits later in the year if energy prices again push up the energy price cap, which will be raised next month.
The MPC believes that falling consumer confidence, a result of said squeezed household disposable incomes, will also dampen the UK’s gross domestic product.
Trussle head of mortgage operations Amanda Aumonier says: “The economic climate is extremely uncertain, and this move will place homeowners under further strain. However, in the face of spiralling inflation, the Bank of England has few other options to try and tackle the wider cost of living crisis.
“It’s important that homeowners, who are feeling anxious about their finances, look at their options. Moving away from expensive standard variable rates, or even just locking in your mortgage payments for a longer term can give you some certainty and peace of mind.”
Trussle’s mortgage repayment calculations are based on a two-year fixed mortgage with a 15% deposit, or £39,600, using a UK average house price of £264,000.
