The majority of mortgage borrowers will not be impacted from today’s interest rate rise, with three out of four currently on fixed rate deals.

The Bank of England may have raised the base rate from 0.1 per cent to 0.25 per cent, but figures from UK Finance show how many property owners have sought to fix rates to avoid protect themselves from sudden payment increases.

Its figures show 74 per cent of all current mortgages are fixed rate deals, with 96 per cent of mortgage advances taken out since 2019 on a fixed rate basis. Data from UK Finance shows that the majority of borrowers have opted for either a two-year or five-year fix. 

This leaves around 26 per cent of mortgage deals on either standard variable rates or tracker deals. UK Finance says around 850,000 mortgage borrowers are on tracker rates ad around 1.1m borrowers on SVRs. It estimates that this rate rise will translate into an additional £9.58 per month payment for those on an SVR. 

Mortgage lenders have yet to announce changes to their SVRs, although those on tracker rates are likely to see the full increase. Repricing of fixed rate products in both the residential and buy-to-let market is expected in coming weeks, although prices have been moving upwards in recent months in anticipation of a rate rise. 

However those working across the mortgage industry do not expect this rate rise to have a significant effect on the market, at least in the short term. Just Mortgages national operations director John Philips says: “Although a slight surprise that it has happened this side of Christmas an interest rate rise was inevitable. However, rates have only rise to 0.25 per cent and the mortgage market shouldn’t be massively impacted in the short term.

“While rates on most products will rise, the amount repaid per month is unlikely to drastically increase to the point borrowers can no longer afford the mortgage. Competition between lenders will keep rates relatively low, and this is unlikely to curb the rampant demand for houses.”

MT Finance director Tomer Aboody, says an upwards adjustment “was always on the cards” as interest rates have stayed so low for so long. “‘While this is a modest increase, the first of a few gradual raises over the next couple of years, it should help keep inflation in check, as well as dampen down the prospect of future house price increases. This is welcome, as the market has been frenzied over the past year.

“Banks and institutional mortgage lenders are still very much liquid which means competition on mortgage pricing will remain high. There may not be a plethora of sub-1 per cent rates but they will still be affordable and on the relatively cheap side.”

However he cautioned against sharp increases to interest rates which could harm those on variable rates and those looking to re-finance at the end of a fixed-rate deal.

SPF Private Clients chief executive Mark Harris adds: “The rise in interest rates was expected yet still surprising as the Bank of England tends not to move rates in December. However, with inflation hitting a 10-year high, it seems as though the committee felt it was finally time to move.

“The markets have already priced in a handful of rate rises, and mortgage pricing has already edged upwards accordingly. Lenders have pulled their cheapest rates although there are still plenty of competitive deals available starting at not much more than 1 per cent.

“Despite the rate rise, borrowers shouldn’t panic. Many borrowers are on fixed-rate mortgages so won’t see any difference to their monthly payments. Those on variable rates will see an uplift in their monthly costs but it will be a fairly modest rise, with rates remaining at incredibly low levels.”