First it was food price rises, then bigger energy bills, and now homeowners are facing hikes in their mortgage payments too.
The Bank of England’s interest base rate currently stands at an all-time low of 0.1%, after being slashed in March last year to limit the economic fallout of the pandemic. The base rate factors in many financial deals, including home loan payments, so “if it goes up, mortgage rates do too”, The Mirror explained.
And with experts now predicting that interest rates will rise to rein in inflation, the UK is heading for “the largest hike in mortgage costs since the 2008 property crash”, said the paper.
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Adding up the cost
The predicted rates increases would be the first since July 2018 and are expected to begin with a “modest” rise of 0.15 percentage points in December, taking the base rate to 0.25%, said The Times. The impact on mortgage payers would be “softened or delayed because most homeowners and buyers are on fixed-rate deals”, the paper added.
But in a blow to households already facing “soaring living costs”, experts expect a “sharp” 0.5 percentage-point climb on a new two-year fixed rate mortgage to 1.7% by the end of next year, said The Telegraph. That would add an additional £50 a month to the cost of paying off a typical £200,000 mortgage.
A total of around two million UK households are on variable-rate mortgages, “meaning a change to base rate would be passed on straight away”, said The Mirror.
And while fixed-rate mortgages remain unchanged for the duration of the deal, a rising base rate would hike the cost of new fixed-rate mortgages, so “all homeowners would face higher prices eventually”.
‘Incredible deals out there’
“The biggest debt cost for most consumers is their mortgage,” said John Stepek in MoneyWeek, “and in about 80% of cases that’s fixed.”
But “if it’s not, you might want to at least consider shopping around just now, given that there are still some incredible deals out there”, he added.
The Independent’s Vicky Shaw agreed that switching mortgage deals could be a good way to “save some cash” amid “rising household bills”.
“A spate of mortgage price wars means there are many low rates to choose from,” she said. Research by MoneySuperMarket last month found that the number of deals with rates below 1% had jumped by 400% since June.
Just be sure “to do your research – thoroughly – and think carefully about any major financial decisions”, said Shaw.
