Homeowners could see their mortgage bills rise by around £400 a year following the Bank of England’s decision to raise interest rates, new analysis from Experian reveals.
The BoE’s Monetary Committee announced today it was hiking Base Rate to 0.75%, the first rise since last November.
The 0.25% rise will see those on Standard Variable Rate (SVR) and tracker mortgages pay around £400 a year extra.
A typical standard variable rate deal with a rate of 3.99%, sees borrowers repay £1,513.63 each month, based on a 20-year mortgage worth £250,000.
But a rate rise of 0.25% to 4.24% would push those payments up to £1,546.64, an increase of £33.01 a month or £396.12 a year.
A tracker mortgage 2% above Base Rate, rising to 2.75%, would see monthly payments rise from £1,324.76 to £1,355.30. That’s a monthly rise of £30.54 a month – or £366.48 a year.
Analysis of the latest data from Experian’s mortgage comparison service shows a jump in consumers shopping for fixed-term deals.
A third (33%) of searches carried out in July were for fixed-term deals, up from 27% in June and 24% in May.
The trend suggests that potential homeowners have been looking to tie themselves in to a fixed deal to protect themselves from an increase in interest rates and mortgage payments.
Amir Goshtai, Managing Director, Experian Marketplace & Affinity, said: “The rise in consumers looking at fixed-term mortgages indicates people have been reacting to the speculation of a potential rate rise.
“If and when there are further rises is yet to be seen, but in the meantime a priority for homeowners should be to take some simple steps to minimise the future impact on them.
“Getting on top of their financial position, doing some detailed budgeting and understanding their credit score will help them prepare for further rate changes.”
Tips to remain in control of an interest rate hike as a homeowner:
Use a mortgage calculator to see how a rate rise will impact your finances, before you decide what action to take
Compare mortgage products to find the best deal for you and speak to a mortgage broker for more info
Check your credit score before you apply for a new mortgage and allow plenty of time to manage and improve it. This could save you money and improve your chances of getting the best deals you’re more eligible for.
Review your spending and make sure you’re planning ahead for both immediate and future interest rises