How Interest rates Impact Your Mortgage
After the Bank of England announced its latest rate rise, mortgage rates are expected to continue climbing for many borrowers.
This is the first time the Bank of England has raised interest rates in back-to-back months since June 2004, as the cost-of-living crisis worsens.
How much will mortgage rates go up?
Borrowers with variable rates will see their monthly mortgage payments rise, according to analysts. In fact, most mortgage lenders are likely to pass on increase in interest rates, thus if you have a variable rate your monthly mortgage payment will go up.
Almost three-quarters of residential loans are on a fixed rate, which protects homeowners from the immediate impact of a base rate hike.
Trackers account for approximately 850,000 outstanding mortgage contracts, whereas more than a million are standard variable (SVR) arrangements. SVRs are set by mortgage lenders individually.
According to the Independent, Chancellor Rishi Sunak is said to have warned ministers that mortgage interest rates could rise by up to 2.5% in the year ahead.
Why are interest rates rising?
To combat increasing inflation, the Bank of England has increased interest rates.
Financial markets are now anticipating multiple increases in throughout 2022, which could bring rates over 1.25 percent by the end of 2022 – the highest level since early 2009.
Many borrowers would be shocked if interest rates increased rapidly, owing to the fact that 10 million individuals in the UK have not witnessed an inflation rate greater than 1% throughout their entire adult lives.
Higher interest rates will also cause problems for the Chancellor, according to the Office for Budget Responsibility, who predicts that a single percentage point rise in rates would cost the country an additional £23 billion in interest payments on its large debt burden.
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