Interest rates: Expert advises on savings and mortgages
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Interest rates have been hiked once again by the Bank of England in an attempt to tackle out-of-control inflation. Today the central bank announced it would lift the borrowing rate from 0.75 percent to one percent, following warnings that inflation is on course to hit its highest level in 40 years.
What does this mean for my mortgage?
Typically, higher interest rates are great for savers, but not so good for those with mortgages and outstanding loans.
A selection of mortgage holders across the UK will be unhappy about the news today, as it means their monthly mortgage payments will go up.
Adrian Anderson, Director of property finance specialists Anderson Harris told Express.co.uk: “With the Bank of England raising interest rates once again to one percent, the highest level in 13 years, this is an attempt to tackle the crippling cost of living crisis gripping the UK.
“Like many banks around the world the Bank of England is attempting to slow down inflation which reached a 30-year high of seven percent in March.
“With inflation so high many City economists are anticipating more increases.
“Three of the Bank of England Monetary Policy Committee members wanted a larger increase to 1.25 percent however, Governor Andrew Bailey recently noted that the Bank of England is walking a ‘narrow path’ between growth and inflation.
“There are concerns that the soaring cost of living and higher borrowing costs due to the high inflation will damage consumer spending which may force the banks to reconsider future rate rises.
“Today’s Bank of England rate rise will not be welcomed by borrowers on variable rate mortgages as the cost of their mortgage will increase.”
Most mortgages in the UK are not on variable or tracker rates, Mr Anderson explained.
Across the UK around 850,000 properties are on tracker mortgages, which directly follow the Bank of England base rate, while 1.1 million are on standard variable rates, which follow a rate set by the lender.
Mr Anderson continued: “The good news is that 74 percent of UK homeowners have a fixed rate deal.
“These borrowers will not be affected today, however it’s likely that the fixed rates available in the future will be more expensive hence anybody with a fixed rate which is ending shortly should shop around as soon as possible.”
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How much more will my mortgage cost?
Elsewhere, credit app TotallyMoney said a rise of one percent above the 0.1 percent will increase mortgage payments by £99 per month or £1,188 per year for a 75 percent loan-to-value mortgage on the average UK property costing £270,708.
But some areas will see their mortgage payments go up more than this average.
On the same terms, in the South East with an average property price of £369,093 would see annual costs rise £1,620 on the same terms.
Similarly in the southwest, mortgage payments will go up by £1,356, and in the East of England mortgages will go up by £1,476 per year.
In the North East, currently the cheapest place to buy property in England, those with a property worth the average of £149,249 on a 75 percent LTV mortgage will see their outgoings go up by £648 a year.
In Yorkshire and the Humber, payments are estimated to rise by £840 per year, and the northwest will witness their outgoings rising by £864 with the interest rate.
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