Average £50 a month extra mortgage cost for millions as base rate rises to 3.5%
The Bank of England has raised the base rate to 3.5% as expected, adding more financial pain to more than two million homeowners, with the average monthly mortgage rising by a near instant £52.
This is now the ninth consecutive increase to the Bank of England base rate in the past year as it tries to curb soaring inflation, recorded at 10.7% in November 2022.
In December last year, the base rate stood at a historic low of 0.1%, but now stands at 3.5%, following a majority 6-3 vote by the Bank’s Monetary Policy Committee.
According to calculations by TotallyMoney and Moneycomms, for the 2.2 million homeowners without a fixed rate mortgage deal – those on variable rates – they will see their average monthly cost rise by £52 (based on the average UK property costing £270,708 with a 75% LTV).
When considering all the base rate hikes over the last year, it means these homeowners have had to absorb an extra £378 a month paying their mortgage.
If you have a fixed rate mortgage, there’s no change until you come to remortgage. Just this week, the Bank of England revealed four million mortgaged homeowners will be exposed to rate rises next year, increasing the costs of their monthly payments by at least £100, and up to £250, adding an extra £3,000 to the cost a year.
Alastair Douglas CEO of TotallyMoney, said: “Today’s announcement comes with little festive cheer and will only add to the woes of households already struggling to heat their homes as snow covers the country.
“It’s essential you contact your lender if you’re finding it difficult to keep up with mortgage repayments. Just last week, the Financial Conduct Authority set out a number of ways in which it expects firms to support borrowers impacted by the soaring cost of living.
“These measures include allowing customers to make lower repayments, switch to interest-only, or moving to a different rate. So there is help if you need it.
“Missed payments can stay on your credit file for years to come, acting as a red flag to lenders when it comes to remortgaging or simply applying for another form of credit. They’ll usually refer to a customer’s credit report during the application process and the best deals will be reserved for those with the best scores.”
Andrew Hagger, personal finance expert at Moneycomms, added: “This latest move by the MPC to try to stifle the rate of inflation will come at a huge financial cost to borrowers and spread further doom and gloom through the UK housing market.
“Desperate times call for desperate measures, but this ninth rate hike in 12 months will cause yet more financial pain to many consumers across the UK, many of who will have little or no wiggle room left in their
According to data site Moneyfacts, the standard variable rate has increased from 4.6% in December 2021 to 6.4% in December 2022.
The average two-year fixed mortgage is currently priced at 6.01%, up from 2.34% last year, while the average five-year fixed rate mortgage comes in at 5.8% now, having climbed from 2.64% in December 2021.