2.2m homeowners set for 0.75% interest rate shock

2.2 million homeowners are set for 0.75% interest rate shock with the Bank of England set to announce the rate increase this Thursday (23rd September).

TotallyMoney and Moneycomms have calculated the potential impact of the MPC’s expected interest rate hike on homeowners without a fixed rate mortgage deal. The research has found that for the average UK property costing £270,708 with a 75% LTV, a 0.75% hike this week means monthly mortgage repayments will rise by £78.

The predicted 0.75% increase means customers will be forking out an extra £274 each month when compared to repayments in 2021.

A further 3.2m homeowners will be in for a shock when their fixed-rate deals expire within the next two years. They face either being put on the SVT or needing to find a new, more expensive offer. The average two-year fixed-rate deal is now at 4.09% — its highest since 2014. This comes as households continue to cope with the soaring cost of living, risking missed payments, and repossessions projected to double by 2024.

Alastair Douglas, CEO of TotallyMoney said “Another increase to the base rate will pile pressure on the finances of over two million homeowners who may already be struggling with the soaring cost of living. With inflation currently sitting at almost five times the Bank of England’s 2% target, it’s clear that something needs to be done — but is this the way? The latest interest rate hike is being closely followed by a new, higher energy price cap, further compounding pressure just as we head into the cold winter months.”

“People’s finances are being squeezed more than ever and the government, regulators, lenders and fintechs need to act quickly to protect people from being pushed to the edge as they risk missing repayments and potentially losing their homes.”

“The three million homeowners whose deals may be coming to an end in the next two years can start preparing now by making sure their credit report is in a good place. Lenders will usually refer to this information to assess a customer’s ability to manage mortgage repayments, and the best deals are often reserved for those with the best scores.”

Andrew Hagger, Personal Finance Expert, Moneycomms.co.uk said “The MPC decision to hike rates for the 7th time in a row since last December shows how severe the current inflation problem has become.”

“Mortgage borrowers approaching their fixed rate renewal are in for a massive shock when they see the eyewatering increase in their monthly repayments.”

“Facing hundreds of pounds extra in mortgage repayments on top of soaring food, fuel and energy costs means some borrowers will face a serious monthly budget deficit.”