Anyone on a variable rate mortgage will see their interest rates go up – mortgage companies are very quick to pass on the Base Rate hike.
The Base Rate rise to 0.5% will mean someone with a £250,000 variable rate mortgage will pay an extra £384 a year. With higher borrowing of £450,000 the increase in costs is more dramatic, at an extra £684 a year.
“The Bank projects that base rate will rise to 1.5% by mid-2023. If this is the case, homeowners with £250,000 of borrowing will have to pay an extra £1,956 a year, compared to the start of the year, while those with £450,000 of borrowing will have to find an extra £3,528 a year, or £294 a month,” said AJ Bell’s Russ Mould.
“One option is to fix your mortgage now, so you lock in current rates and avoid any future interest rate rises. Mortgage companies have already started to increase their rates, and they’ll rise again now the rate rise has actually happened. Someone with £250,000 of borrowing on the average standard variable rate mortgage now*** could save £5,316 a year by switching to the current top two-year fix. If someone wanted to switch for longer they’d save less each year, but more over the term of the fix.”