£1,000 hike in mortages if interest rate keeps rising

MILLIONS of homeowners face mortgage bill hikes of around £1,000 next year if interest rates continue to rise as expected.

The Bank of England’s decision to increase the base rate from a record low 0.1 per cent to 0.25 per cent yesterday will add an extra £144 a year to the cost of a typical home loan.

And some analysts predict it could hit 1 per cent before the end of next year. This would see borrowers with a typical £150,000, 25-year mortgage, on a standard variable rate of 3.59 per cent, pay an extra £75 a month, or £900 a year, according to broker L&C. Asked if there

‘Time has come to act’

were more rate rises to come, the Bank’s chief economist Huw Pill said: ‘Yes, I think that is true.’

He said concerns around soaring inflation, tipped to hit a 30year high of 6 per cent next year, meant the ‘time had come to act’. Yet higher interest rates will pile yet more pressure on struggling families whose budgets are already being squeezed by a perfect storm of household bill and tax hikes.

The average household energy bill is set to soar to as high as £1,891 a year from April, while food, petrol and council tax costs are all rising too.

It came as Halifax predicted that house price growth will slow dramatically next year, with average increases in the range of 0 to 2 per cent.

The average property price rose by 8 per cent this year.