Misery for millions as mortgage payments rise £588 a year
More than 1.6 million homeowners will be hammered by another surge in their mortgage bills after interest rates rise on Thursday.
If the Bank Rate reaches 4pc as expected, 715,000 mortgage borrowers on tracker rates will see their payments go up by £588 a year on average, according to trade body UK Finance.
Another 895,000 on “standard variable” rates will be hit with increases of £370 a year.
The Bank Rate is poised to rise from 3.5pc to 4pc – to reach its highest level since the 2008 financial crisis.
Homeowners with tracker deals will have mortgage repayments that are £382 more per month, on average, than they were in December 2021, before the Bank Rate started climbing from a low of 0.1pc.
For mortgage borrowers on SVRs, the increase will amount to £240 a month.
David Hollingworth, of broker L&C Mortgages, said the price of new fixed mortgage rates will not be affected as the increase in the Bank Rate is already priced in.
He said: “We're not expecting any kind of noticeable change in fixed rates – they've been coming down despite the fact that Bank Rate has been increasing.”
Fixed rates are based on longer-term expectations about the Bank Rate, as well as other factors such as gilt yields and swap rates. They shot up above 6pc after the mini-Budget spooked markets last September but have been coming down ever since.
The average two-year fixed rate is now 5.44pc, compared with 2.34pc at the beginning of December 2021, according to the analyst Moneyfacts. The average five-year deal is at 5.2pc, up from 2.64pc.
Mr Hollingworth said fixed rates are expected to come down even further. This could make them cheaper than variable rates in the coming months.
Lloyds is offering a 10-year fixed rate at 3.99pc, with Virgin Money following suit yesterday with a similar deal.
Some homeowners whose fixed rate deals have ended are biding their time on tracker rates.
The average two-year tracker rate is at 4.39pc, up from 1.58pc in December 2021. The average standard variable rate has risen from 4.4pc to 6.84pc during the same time frame.
This is expected to rise following Thursday’s decision by the Bank of England.