Biggest interest rate hike in 27 years set to shock 2m mortgage customers

With the Bank of England (BoE) set to announce the biggest interest rate rise in 27 years this Thursday (4th August) new research by TotallyMoney and Moneycomms have analysed the potential shock the hike will have on 2 million variable-rate mortgage customers.

The research found that the average UK property costing £270,708, with a 75% LTV, will mean that a 0.5% mortgage repayment hike will cost £196 per month more than in November last year.

Even if the BoE raises the rate by just 0.25%, the same mortgage repayments will have risen by £144 per month since November 2021.

The 850,000 properties on tracker mortgages and 1.1 million on Standard Variable Rates, one in four mortgage (c. 20 million) customers will have no protection against the interest rate hike.

Meanwhile, 33% borrowers with a fixed rate deal are heading for a payment shock when their current offer expires in the next two years. They will need to find a new deal at a higher rate, or face being placed on lender’s standard variable rate (SVR).

Whilst previous research by TotallyMoney found that 16 million adults wouldn’t be able to afford an unexpected payment of £300 in the next 12 months.

Alastair Douglas, CEO of TotallyMoney said “The latest interest rate hike will serve as yet another blow to the two million mortgage borrowers without a fixed-rate deal. Repayments for the average home are set to rise by £52, an increase of £196 per month since last autumn.”

“What’s more, this isn’t an isolated problem. With everything ranging from phone bills to food feeding inflation, costs will continue to soar over the upcoming months, increasing pressure on household finances for millions.”

“The one in three homeowners whose fixed-rate deal is soon coming to an end should start planning ahead. Not only is the SVB rising, but new deals are also getting more expensive. Either way, you’re likely to be paying more, so it’s worth looking at your options in advance.”

Andrew Hagger, Personal Finance Expert, Moneycomms.co.uk said ”The MPC decision to hike rates for the sixth time since last December will make borrowers wince at the thought of yet higher monthly mortgage costs.”

“Customers on a fixed rate will avoid immediate financial pain, but for many a triple digit increase is inevitable next time their mortgage deal comes up for renewal.”