You are here: Home - Mortgages - Remortgage - News -

A 1% rate rise would add £10bn to mortgage repayments

0
Written by: Lana Clements
26/02/2018
Household mortgage bills would jump by a typical £930 a year if the Bank of England were to raise the base rate by 1%, analysis has revealed.

Higher rates would collectively add £10bn to UK mortgage repayments, according to the study by estate agent Savills.

Four in 10 borrowers on variable rate mortgages would see an overnight increase of around £4.3bn, while those on fixed-rate deals would be hit as terms end.

Buy-to-let landlords would overall pay £2.4bn more for mortgages, with other homeowners paying £7.8bn.

The Bank of England recently warned it could raise interest rates faster and sooner than previously forecast, with the next hike now expected in May.

And over the weekend, Dave Ramsden, the Bank’s deputy governor, reinforced the point.

He told the Sunday Times: “I see the case for rates rising somewhat sooner rather than somewhat later.”

Higher interest rates are set to flatten house price growth, with values to rise by 14% over the next five years and 7% in London, according to Savills.

Lucian Cook, head of residential research, said higher rates would “bring an end to the historically low mortgage costs that have boosted housing affordability and limit the buying power of those needing a mortgage, and underscores our forecasts for more subdued house price growth over the next five years”.

He added: “We’d expect first-time buyers in London, whose mortgage costs relative to earnings are already more stretched than for any other group, to be most affected.”

Mortgage bills different to the financial crisis

Mortgage capital repayments are now much higher, compared to a decade ago during the financial crisis, according to Savills.

Outstanding mortgage debt currently stands at around £1,367bn and the annual mortgage bill at around £84.7bn.

More than eight out of 10 mortgages are now repayment loans.

But back in 2007, total borrowing was lower at £1,156bn but the annual mortgage bill was 18% higher at £100bn and just half of mortgages were repayment.

At the same time, the total number of outstanding mortgages has fallen by half a million as ownership among younger households has dropped.

But mortgaged buy-to-let landlord numbers have risen by 867,000.

Buy-to-let interest only borrowers have been the main beneficiaries of post credit crunch mortgage trends, according to Savills.

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Flight cancelled or delayed? Your rights explained

With no sign of the problems in UK aviation easing over the peak summer period, many will worry whether holida...

Rail strikes: Your travel and refund rights

Thousands of railway workers will strike across three days this week, grinding much of the transport system to...

How your monthly bills could rise as the base rate reaches 1.25%

The Bank of England has raised the base rate to 1.25% as predicted – the fifth consecutive rise in just six ...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

DIY investors: 10 common mistakes to avoid

For those without the help and experience of an adviser, here are 10 common DIY investor mistakes to avoid.

Mortgage down-valuations: Tips to avoid pulling out of a house sale

Down-valuations are on the rise. So, what does it mean for home buyers, and what can you do?

Five tips for surviving a bear market mauling

The S&P 500 has slipped into bear market territory and for UK investors, the FTSE 250 is also on the edge. Her...

Money Tips of the Week