How much the interest rate increase tomorrow by the Bank of England will affect your mortgage.
How much would your mortgage increase by if the base rate increased by 0.25 percentage points to 4.75% as predicted by some analysts and by 5% as predicted by others?
After inflation stayed the same at 8.7%, the Bank of England is anticipated to increase interest rates once more tomorrow for the twelfth consecutive time.
The base rate, which affects interest rates charged by several lenders for loans, mortgages, and other types of credit, is now 4.5%.
Some analysts anticipate a 0.25 percentage point increase in the base rate to 4.75%, while others foresee an even larger increase to 5%.
A typical variable-rate mortgage borrower in a £270,000 home would see an increase of £32 in monthly repayments, according to new statistics from TotallyMoney and MoneyComms.
Their repayments will have increased by £529 per month since late 2021, when the base rate was just 0.1% in December of that year.
But there are regional variations.
An additional 0.25% rate increase in London will increase monthly mortgage payments by £61 and result in a typical borrower paying £1,017 more per month than they would have in late 2021.
Mortgage rates might increase by £42 per month in the South East, compared to £22 in Yorkshire and Humber.
In an effort to curb inflation, the Bank of England has been boosting interest rates.
The idea behind rising interest rates is that if demand declines as a result of individuals spending less, inflation should also decline.
Energy price declines are helping to slow inflation, which peaked at a 41-year high of 11.1% in October 2022 but is still much higher than the Bank of England’s 2% target.
If you have a tracker mortgage, it will fluctuate in accordance with the base rate, making it more expensive as the base rate rises.
Mortgages with standard variable rates (SVRs) typically increase as well, but it is up to your lender to pass through any increases.
Usually, after your fix or tracker rate expires, you’ll be on an SVR sort of mortgage contract.
If you have a fixed-rate mortgage, your rate won’t change as long as your current agreement is in effect.
However, given how much interest rates have increased over the past year, you will probably pay more now when it comes time to remortgage.
This year, around 1.5 million homeowners will exit fixed-rate mortgage agreements, which will result in a significant increase in their monthly repayments.