Today’s increase of the base rate by the Bank of England is set to further stretch embattled homeowners, Charlotte Nixon, mortgage expert at Quilter Investors has warned.
Earlier today the Central Bank upped increased interest rates by 0.25% to 1% – a 13 year high.
She said: “With interest rates being hiked to 1% there will be swathes of the nation desperately trying to calculate what this actually means for their monthly payments.
“Fortunately, the large majority of borrowers are on fixed rate deals so won’t feel the hit until their mortgage deal comes to an end.
“However, those on variable or tracker mortgages could see their monthly payments creep up. A borrower with a home valued at around £250k on a 25 year mortgage could see their monthly payments rise by as much as £240 if interest rates go up another 1.75%.
“Inflation is predicted to continue to spike, and more rate increases may very well be on the cards. At present, the housing market continues to be buoyant despite significant headwinds and this may be because people are recognising that rates are on the move and are scrambling to buy so they can lock in a mortgage deal while they are still relatively low.
“There have been years of ultra-low interest rates and many may suddenly struggle to meet their monthly payments and other outgoings if they stay in their current property especially with rising energy and food prices on top.
“This could bring more houses to the market as people downsize and the laws of supply and demand dictate that that could mean we see house prices at the very least stall if not cool down.
“First-time buyers continue to suffer significantly as they are faced with a myriad of problems including inflation eating away at their deposits, interest rates causing their monthly payments to be higher and the rest of the inflationary pressures. This may be one of the worst times in history to be trying to get your foot on the housing ladder.”
