Extra £3k on home loans in 12 months

BORROWERS with a mortgage which directly tracks the Bank of England base rate will typically see monthly payments rise by £73 due to yesterday’s increase.

The latest base rate rise means that since last December the average monthly tracker loan payment will have gone up by £284.17 – around £3,410 more that borrowers need to find every year.

The rise from 2.25 to three per cent yesterday itself adds £73.49 on to a borrrower’s monthly outgoings.

Just under one in 10 outstanding residential mortgages are trackers while around four in five are fixed-rate deals.

The average standard variable rate (SVR) mortgage will increase by £46.22 per month, according to finance trade body UK Finance, if a lender passes on the base rate increase in full.

SVRs are set individually by lenders and borrowers often end up sitting on them when the initial deal ends.The average monthly SVR cost has increased by £178.70 since December, assuming that the rises are passed on in full.

Bank of England figures this week showed mortgage approvals for house purchases fell significantly to 66,800 in September from 74,400 in August.

Base rate rises are not the only factor used by lenders to price their mortgages.

Market volatility following Kwasi Kwarteng’s mini-Budget prompted a surge in mortgage rates and led to many products being taken off sale.

An Office for National Statistics survey found 48 per cent of mortgage holders are worried about changes in interest rates.

Stretched mortgage affordability will also impact the housing market.

While fixed-rate mortgage holders are cushioned from the immediate impacts of the base rate rise, many may be shocked by increases when their deal ends.

Alex Maddox, capital markets and digital director at specialist lender Kensington Mortgages, said the rise “will hit hard for households, homeowners and prospective buyers”.

Tomer Aboody, director of property lender MT Finance, said: “Rising inflation, coupled with the disastrous mini-Budget, mean this rate rise was always on the cards. Borrowers need to come to terms with the new norm, which is higher interest rates.”

Brian Murphy, head of lending at the Mortgage Advice Bureau network, said: “Expectations are that the industry will see an upwards trend of defaults on mortgage payments...so we urge anyone fearing that they may struggle with mortgage payments to go straight to their mortgage provider for guidance.”