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

Base rate rises to 4%, heaping £50 extra to monthly mortgage bills

Written by:
The Bank of England has raised the base rate for the tenth consecutive time as it reaches 4%, and heaps more misery to households already feeling the effects of inflation on essential bills.

The Bank’s Monetary Policy Committee (MPC) voted by a 7-2 majority to raise interest rates by 0.5 percentage points from 3.5% to 4% as it tries to curb inflation which stood at 10.5% in the year to December.

The base rate is now at its highest level since the 2008 financial crisis and has risen 10 times in a row from its historic low of 0.1% in December 2021.

This latest rise is likely to feed into mortgage costs, which have already risen substantially over the past year.

Anyone on a variable rate mortgage can expect to see a near instant increase to monthly payments, while anyone coming off a fix in the coming months will be met with higher rates when remortgaging.

For the average UK property costing £270,708 with 75% loan-to-value, monthly mortgage payments will likely increase by £52 for the two million homeowners without a fixed rate deal, according to calculations by TotallyMoney and Moneycomms.

Since December 2021 when interest rates started rising, this means homeowners on variable rate mortgages are forking out an extra £430 each month.

However, the rates are likely to go higher. Andrew Hagger, personal finance expert at  Moneycomms, said: “This tenth successive rate hike is unlikely to be the last in 2023 and will inflict further financial pain on borrowers – many of whom are already on their knees and simply unable to absorb any further cost increases.”

The Bank of England previously revealed that around four million homeowner-occupied mortgages are expected to increase over the next year, while regulator, the Financial Conduct Authority stated more than 750,000 households are at risk of mortgage default as interest rates continue to rise.

Alastair Douglas, CEO of credit app, TotallyMoney, said: “If you’re one of the 750,000 homeowners at risk of defaulting on your mortgage in the next two years you must contact your lender as soon as possible. The Financial Conduct Authority recently instructed firms to support borrowers with measures which included allowing customers to make lower repayments, switch to interest-only, or moving to a different rate.

“Missing a payment could impact your ability to access credit for years to come. Not just for big ticket items like loans and mortgages, but also for things like mobile phone contracts and car insurance. Lenders usually check a customer’s credit report during the application process, and the best deals are reserved for those with the best scores.”

Related: Five options if you’re struggling with your mortgage bills

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.

Everything you wanted to know about ISAs…but were afraid to ask

The new tax year is less than a fortnight away and for ISA savers or investors, it’s hugely important. If yo...

Your right to a refund if travel is affected by train strikes

There have been a wave of train strikes in the past six months, and for anyone travelling today Friday 3 Febru...

Could you save money with a social broadband tariff?

Two-thirds of low-income households are unaware they could be saving on broadband, according to Uswitch.

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