Bank of England interest hike: what impact will this have on fixed, variable, tracker, SVR mortgages? | Personal finance | Finance
Providing an example, Ms Coles said: “If you have a mortgage of £250,000 over 25 years, at the average Moneyfacts mortgage rate of 5.4%, and the full rate has been passed on, that would mean an increase in monthly mortgage payments of £1,520 to £1,643 – so you would need to find an additional £123 per month.
Standard Variable Rate Mortgages (SVR)
Ms Coles said: ‘For anyone whose fixed rate contract has come to an end and who have decided to go back to SVR and wait and see what happens to the fixed rates, it could end up causing the kind of ills headache that you may have been trying to avoid.
“A standard variable rate (also known as a reversion rate) is the highest rate from a mortgage lender and is what you’ll land on once your fixed rate deal ends.”
However, Ms Suter said: “[SVRS] generally increase as the base rate increases, but not as quickly as with a follow rate. The mortgage lender will decide whether or not to raise these rates and give notice before they do.
Reacting to the increase, Adrian Anderson, Director of Real Estate Finance Specialists, Anderson Harris said: “This will be a blow for around 1.5 million variable rate mortgage holders (around 20% of borrowers) who will see a significant increase in their mortgage payments.
“There is a silver lining, however, as we appear to be setting sail for calmer seas. Future increases in the Bank of England’s base rate are expected to be more modest than this. which is already expected in current fixed rate mortgages, so we don’t expect to see new fixed rates increase based on the base rate.
“Today’s news will be painful for many, however, it should come as no surprise. At some point, after mini budget analysts factored in the Bank of England base rate peaking at around six percent.Some analysts now predict the peak will be around four percent.
How can borrowers limit mortgage repayments?
Kellie Steed, Mortgage Expert at money.co.uk commented: “Those with fixed rate mortgages coming due soon may want to consider changing their deal sooner to take advantage of interest rates before they rise.
“However, a new mortgage before the end of your current contract could mean that you will have to pay an early repayment charge (ERC). You should compare the cost of ERCs to the amount you think you can save by remortgaging, to make sure the early switch is worth it.