Interest rate rise will mean that repayments are £529 per month higher that before hike series

New research by TotallyMoney has predicted the impact of the Bank of England’s hiking interest rates by a further 0.25% (to 4.75%) on borrowers with a variable rate mortgage head of the next MPC announcement on the 22nd of June.

The research found that for the average UK property costing £270,708 with a 75% LTV, a 0.25 percentage point hike means homeowners without a fixed rate will find themselves paying £529 per month more than they were before the series of hikes started.

Unsurprisingly, Londoners are paying the biggest price, with a 0.25% hike on the average property adding an extra £61 to their monthly mortgage payments, meaning they’re paying £1,017 per month more than in November 2021.

This year, more than 1.4 million households will feel a shock when their fixed rate deal comes to an end this year — 57% of which were fixed at rates below 2%
Hundreds of offers are being pulled from the market by lenders, while rates are on the ascent, with the average fixed rate now sitting at 5.72%.

Since December 2021, we’ve seen 12 consecutive interest rate hikes from the Bank of England’s Monetary Policy Committee. On June 22nd they’ll meet again, and are expected to increase the interest rate for the 13th time, by a further 0.25 percentage points.

This year, 1.4 million households will be in for a shock when their current deal comes to an end and they find themselves on a variable rate. What’s more, 57% of these were on deals with rates below 2%, and the new average fix is 5.72%.

The FCA has instructed lenders to support struggling borrowers with temporary measures which include temporarily reducing your rate, giving customers more time to make payments, extending the term of the agreement, and switching to interest only.

Over two million borrowers have already been helped but some may be missing out as 47% of borrowers in financial difficulty wrongly believed they would impact their credit file if they contacted their lender regarding support.

Alastair Douglas, CEO of TotallyMoney said “With inflation still far higher than its 2% target, the Bank of England is relentlessly ramping up interest rates in a bid to slow spending. The belief being that for every £1 increase to a homeowners mortgage repayments, they’ll reduce overall spend by 40 pence.”

“However, for many there’s not much more to cut back on. Each month food prices are hitting fresh highs, while the new energy price cap will bring little warmth and happiness to struggling families.”

“For some, the worst is yet to come, with over a million fixed-rate mortgage deals coming to an end this year. Many of which are locked in at less than 2%, while the new average fixed rate is now almost 6%.”

“If you are looking at locking in a new offer, make sure you do your research first. Get in touch with an independent mortgage broker who can take you through your options and research the whole market for your best borrowing options.”

“You should also check your credit report is up to date and that you’re in good financial shape. It’s free to do and could save you thousands as the best offers will usually be reserved for those with the best scores.”

Andrew Hagger, Personal Finance Expert, Moneycomms.co.uk said “Consumers will be frustrated that rate hikes haven’t petered out by now, and worrying that their already battered finances will be squeezed further. There are still many mortgage borrowers due to come off low-rate fixed rate deals and facing a horrendous increase in monthly repayments when they refinance.”

“Savers are benefitting from a surge in rates across easy access and fixed rate products and enjoying returns they could only have dreamed of this time last year.”