Amidst the growing anticipation of further Base Rate hikes, mortgage market volatility persists, fuelling concerns among homeowners about the extent to which their monthly repayments will rise this year.
The Bank of England’s Monetary Policy Committee has boosted the Base Rate 12 consecutive times since December 2021, bringing it to a 14-year high of 4.5 percent.
On Thursday, June 22, the MPC will meet again and as per estimations by market analysts, are expected to increase the interest rate for the 13th time by a further 0.25 percentage points.
While the objective of this move is to stem the UK’s 8.7 percent inflation rate and encourage individuals to save rather than spend, it does make borrowing more expensive, subsequently impacting mortgage rates.
Whether or not a person will be impacted by any potential decision on Thursday will depend on their mortgage deal – if it’s fixed rate or variable. TotallyMoney and Moneycomms have calculated the cost of the expected 0.25 percentage point rate hike (to 4.75 percent) on borrowers with a variable rate mortgage.
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For the average UK homeowner without a fixed rate deal, calculations show a 0.25 percentage point increase will add another £32 to their mortgage payments this month, meaning they’re paying an extra £529 per month when compared to November 2021.
Splitting this by region, Londoners are expected to feel the biggest impact, where the average property price in November 2021 was £519,934.
According to TotallyMoney, the expected hike will increase monthly payments by £61, meaning homeowners will now be paying an additional £1,017 per month compared to before the series of hikes began.
Homeowners with variable rate mortgages in the South East could expect to see the second-largest rise in monthly payments at £42 extra, amounting to an additional £722 per month compared to November 2021.
Homeowners in the North East are estimated to have the lowest increase at £17 per month, however, it still amounts to an additional £292 a month since November 2021 where the average property price was £149,249.
Variable rate mortgage holders in the East of England are expected to see a £39 per month increase after a 0.25 percent hike, reflecting an increase in monthly payments by £660 since November 2021, while those in the West Midlands may see a monthly payment increase of £27.
This year, up to 1.4 million households are expected to see their fixed rate deals come to an end, with 57 percent having deals with rates below two percent.
New research by Moneyhub found that a quarter (26 percent) of homeowners with a mortgage said that a further interest rate rise would mean they won’t be able to afford their mortgage payments.
In addition, a third (35 percent) of homeowners with a mortgage said they were concerned that they will not be able to afford their mortgage when they re-mortgage due to rising rates.
Alastair Douglas, CEO of TotallyMoney commented: “With inflation still far higher than its two percent target, the Bank of England is relentlessly ramping up interest rates in a bid to slow spending, with the belief being that for every £1 increase to a homeowners mortgage repayments, they’ll reduce overall spend by 40 pence.
“While some have remained immune to the series of hikes, over a million fixed-rate deals are coming to an end this year — many of which were locked in at less than two percent, while the new average fixed rate deal now sits above six percent.
“Many will be asking themselves if they should secure a new deal, or wait for rates to drop. The truth is that everybody’s personal situation is different, so there’s no single right answer.”
Mr Douglas continued: “Make sure you do some research and then get in touch with an independent mortgage broker who can look at the whole market for your best borrowing options. You should also make sure the information on your credit report is correct and up to date — it’s free to do and could save you thousands of pounds as the best offers will usually be reserved for those with the best scores.”
While the Government has ruled out the provision of financial assistance for struggling mortgage customers, the Financial Conduct Authority has ordered banks to support those who need it.
Mr Douglas said: “Options include moving to reduced monthly payments or extending the mortgage term. So contact your lender and ask for support — and remember, this won’t impact your credit rating.
“However, missed payments can — and they could stay on your credit file for up to six years. If these persist, you might end up in mortgage arrears, leading to court action and even repossession.”
