Rate rise will hit the roofs

Hike threat to millions with mortgages

INTEREST rates could rise this week – and that would be bad news for borrowers – with millions of mortgage holders having to find an extra £400 a year.

Experts reckon the Bank of England’s official rate could climb for only the second time in a decade on Thursday.

It’s committee is expected to increase it from 0.5% to 0.75%, the highest level since March, 2009.

And if it happens, many home loan borrowers could feel the negative effect pretty sharpish.

Mark Harris, of mortgage broker SPF Private Clients, warned: “Mortgage lenders are usually quick to pass on any increase in base rate.

“So if you are on your lender’s standard variable rate, a discounted-variable rate or base-rate tracker, then you will see an increase in your monthly mortgage payments.”

Number-crunchers at Experian have caclulated a 0.25% hike would mean a typical borrower on a standard variable rate or tracker mortgage would be forced to find around £400 a year extra. That hefty sum is based on a typical standard variable rate deal of 3.99% or a tracker mortgage 2% above base rate on a 20-year mortgage worth £250,000.

One solution to get out of trouble is to switch to a fixed rate mortgage and take advantage of deals at present of less than 2%.

But if the expected increase proves difficult to manage, you should talk to your lender, advised Hannah Maundrell of money.co.uk.

“If rates rise, find out how much your monthly repayments will go up by and if you can’t afford to pay extra don’t be a sitting duck. Talk to your lender about your options so you don’t end up over stretching your finances.”

Credit card borrowers could also be hit hard, warned Andrew Hagger of Moneycomms.co.uk.

“If you have a credit card with Barclaycard or Halifax your interest rate is linked to base rate, so higher rates will kick in straight away,” he

said.