MORTGAGE holders on tracker deals face nearly £24 per month being added to their payments, on average, following the latest Bank of England base rate rise.
Based on the mortgages outstanding, the new 0.25 percentage point rise, which takes the base rate to 5.25%, will add on £23.71 typically to monthly tracker payments.
According to figures from trade association UK Finance, this could add up to nearly £285 per year.
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For homeowners on a standard variable rate (SVR) mortgage, the average payment could increase by £15.14 per month or nearly £182 per year.
SVRs are set by individual lenders and often follow movements in the base rate.
The latest base rate increase is the 14th in a row.
Taking all 14 base rate rises into account, average monthly payments will have increased by £488.50 for tracker deals and, assuming base rate rises have been fully passed on, £311.90 for SVRs.
This adds up to an average annual increase of £5862 for homeowners on tracker mortgages and £3742.80 for SVR customers.
The Bank of England uses base rate rises as a tool to try cool inflation.
Mortgage rates have jumped as inflation has been stubbornly high, but there has been a bigger-than-expected slowing in inflation recently. UK Consumer Prices Index (CPI) inflation was 7.9% in June, slowing from 8.7% in May, according to the Office for National Statistics (ONS).
This has fuelled expectations that the base rate may not need to climb so high.
Around eight in 10 (81%) homeowner mortgages outstanding are fixed-rate deals – but these households could be in for a bill shock when their current deal ends.
Around 800,000 fixed-rate deals are ending in the second half of 2023 and 1.6 million deals are due to end in 2024, according to UK Finance’s figures.
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Richard Lane, director of external affairs at StepChange Debt Charity, said: “Those who have already fixed onto a new mortgage rate in the last few months will be facing significantly higher monthly payments, while many landlords have already passed on higher debt servicing costs to their tenants, making the private rented sector increasingly unaffordable to renters on low and middle incomes.”
Richard Donnell, executive director of research at property website Zoopla, said: “For homeowners and would-be buyers who are impacted by mortgage rates, it’s important to note that the impact is not uniform across the UK.
“Higher mortgage rates hit harder in higher value markets in southern England, where a larger deposit and income are required to buy with a mortgage. In contrast, in the north of England and Scotland, house prices are still rising as the impact of higher mortgage rates is less pronounced.”
UK Finance has said it expects that the number of households in arrears in 2023 to remain below 1% of outstanding mortgages.
Mortgage lenders representing over 90% of the mortgage market have signed up to the Government’s new mortgage charter, committing them to additional support for borrowers.
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This includes giving homeowners approaching the end of a fixed-rate mortgage the chance to lock in a deal and request a better like-for-like deal if rates change up to six months ahead and a guarantee of no repossession within 12 months of a first missed payment.
Lenders offer a range of mortgage support options, tailored to customers’ needs.
Fixed mortgage rates have been holding steady in recent days. According to Moneyfactscompare.co.uk, the average two-year fixed-rate homeowner mortgage rate on the market is 6.85%, which is unchanged from Wednesday.
Back at the start of December 2021, the average two-year fixed-rate mortgage was 2.34%.
The average five-year fixed homeowner mortgage rate is 6.36%, down from an average rate of 6.37% on Wednesday. The average five-year fix was 2.64% in December 2021.
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