Mortgage bills to soar… with more pain to come

RELENTLESS interest rate increases mean mortgage borrowers now face paying thousands of pounds more for their home loans.

The Bank of England yesterday raised its base rate for the fourth time in less than five months to a 13-year high of 1 per cent.

The move will add £252 to the annual cost to a homeowner with a £150,000 standard variable loan based on the previous rate – and £756 for those with a £450,000 mortgage.

But experts predict more pain to come, with analysts Capital Economics expecting the base rate to reach as high as 3 per cent next year. This would mean homeowners with a £150,000 loan would be paying an extra £3,048 a year when compared with December last year, when the base rate was at a record low of 0.1 per cent.

Borrowers with a £450,000 loan would face a £9,132 rise in the annual cost of their mortgage. Families are already struggling with soaring energy and tax bills and rocketing inflation.

Sarah Pennells, consumer finance specialist at Royal London, said: ‘Borrowers on a variable rate have barely had time to deal with the effects of the last rate rise and are now faced with a further increase. While some will be able to afford it, others will undoubtedly struggle.’

There are around 1.1million homeowners with standard variable rate mortgages and 850,000 on tracker deals who are now likely to see their repayments raised from next month. Even those on fixed rates could eventually face a substantial rise in their payments.

Joanna Elson, of charity the Money Advice Trust, said: ‘We know that any small increase in costs can push households with stretched budgets into difficulty.’

Fixed-rate mortgage deals can protect borrowers from rising interest rates and brokers have already seen a surge in those locking into longer-term fixed loans.

Dominiki Lipnicki, of Your Mortgage Decisions, said: ‘We are taking at least four times as many tenyear fixer applications as normal.’

David Hollingworth, of L&C Mortgages, added: ‘Those that don’t take action to pin down their rate could see their mortgage become an increasing burden.’ The average rate on a two-year fix stands at 3.03 per cent, up from 2.34 per cent in early December, according to analysts Moneyfacts. The average standard variable rate is 4.78 per cent.

More lenders raised rates yesterday, following others who pulled their cheapest deals last week. NatWest confirmed it would be increasing some of its two-year fixed deals by up to 0.35 percentage points.