Yesterday’s rate rise could push mortgage payments up by over £40 and put up to one in ten of those on variable rate mortgages under financial pressure, according to Hargreaves Lansdown.
If the Bank of England rate hits 1.5%, it could mean more than a third of people with variable rate mortgages face difficulties.
Meanwhile, with 1.5 million fixed-rate mortgages set to expire this year, more than a third could face financial stress if the base rate hits 1.5%.
Sarah Coles, senior personal finance analyst, Hargreaves Lansdown, said: “The rate rise may have looked relatively harmless, but with so many people’s finances on a knife edge, it risks pushing them into difficulties.
“Even this small increase could put one in ten people on variable rate mortgages under financial pressure.
“If rates continue to go up, and the Bank of England rate reaches 1.5%, more than one in three could face real financial challenges. And while those on fixed rate mortgages are protected for now, 1.5 million face the end of their term this year, and over a third might struggle with the extra cost.
“Last month we asked people how much their monthly mortgage payments would have to rise this year in order to put their finances under pressure, and 10% of people said up to £50 would be enough. Once increases started closing in on £100 a month, a third of people said they’d face difficulties, and with a rise of up to £200 a month, two thirds said they’d struggle. Unfortunately, rises of this size are possible.
“Assuming rate inceases are passed on in full, someone with a 25-year £300,000 repayment mortgage, on an average SVR of 4.71%, could find themselves paying £42 more each month after yesterday’s rate rise. If the Bank of England rate was to subsequently increase to 1.25%, they might pay £88 more a month overall, and if it went to 1.5%, in total, they might pay £132 more.
“Those on an average two-year tracker of the same size and duration could see marginally smaller rises, but it could still be £38 this month, £75 at 1.25% and £114 at 1.5%.
