Mortgage borrowers whose deal directly follows the base rate will see their payments rise by around £49 a month on average, totaling nearly £600 a year, following Thursday’s base rate hike.
The figures, from trade association UK Finance, also showed that a borrower sitting on their lender’s standard variable rate (SVR) will typically see a monthly increase of just under £31, or around £370 a year .
Almost four-fifths (78%) of outstanding residential mortgages are at fixed rates, meaning these borrowers won’t see the immediate impact of the Bank of England’s base rate hike to 1.75 on Thursday. % to 2.25% – the highest level since November 2008.
But, if they’ve been safely locked into their home loan for a while, they may end up with a shocking bill when they finally remortgage.
Tim Bannister, Rightmove’s housing expert, said: “While the majority of people have fixed rate mortgages, there is looming concern for those whose terms are due to end in the next six months or so, as interest rates continue to rise.
“It is likely that those who choose to mend again will find that rates have doubled in some cases since their last lockdown, and so despite paying off some of their debt, they may find that their new monthly mortgage payments are more high, even if they have moved to a lower LTV (loan-to-value) bracket and have accumulated equity.
“They will now face the difficult decision of whether to switch to a follow-on mortgage in the hope that interest rates will come down again soon, or take another fixed deal for a little more certainty over their spending.”
The latest hike could also make it harder for first-time buyers to climb the property ladder, adding to the rising cost of collecting a down payment.
According to property website Rightmove, first-time buyers typically need to raise £22,409 if they want a 10% down payment on a house, up from £14,135 10 years ago.
There has been speculation this week that a reduction in stamp duty could be on the cards, although some commentators have suggested it could drive up house prices further.
Nathan Emerson, CEO of estate agents and lettings body Propertymark, said: “The recent rises have been so widely talked about that it has directly fueled consumer sentiment and left some people uneasy. idea of moving, but those looking to enter the market shouldn’t be scared off by it.
“Despite the increases, the majority of buyers and sellers are taking advantage of lower house prices and a slight easing of competition, and they continue to enter a strong and healthy market.”
Those with other types of debt will also feel the pressure from rising rates.
Alice Haine, personal finance analyst at Bestinvest, said: “Consumers borrowed an additional £1.4bn in credit in July, another jump from the £1.8bn increase in June – with half that sum on credit cards alone – underscoring just how difficult the current environment has become.
“Anyone who already has a fixed rate personal loan or auto loan need not panic yet because the terms of their loan have already been agreed upon, but new borrowers looking for credit may find the cost of debt higher. .
“Anyone with a small credit card balance that they are struggling to pay should consider switching to a 0% balance transfer agreement to give themselves some breathing room.
“It gives them an interest-free period to pay off the debt at their own pace without worrying that the debt will spiral out of control.”
Savers, meanwhile, could see some improvements in offers in the coming weeks.
But Ms Haine said that with high inflation, ‘the real return on any money deposited in a savings account will be deeply negative – regardless of the headline rate’.
She added: “With the best easy access accounts climbing to 1.95% this week and the best futures accounts reaching 3.82%, every penny of extra interest will be crucial in the fight against high inflation, which is eating away at our purchasing power.
“But it may be worth the wait for the latest interest rate hikes to trickle down from lenders to savers.
“While banks and building societies are quick to apply higher rates to debt, they may be a little slower to deliver the good news to savers.”