Are You at Risk with Rising Interest Rates?

30 September 2022


The Bank of England has once again raised interest rates to the highest level for 14 years and warned that the UK may already be in a recession.

The news comes as no surprise to many as the cost-of-living crisis, rising hyperinflation and other rising bills like energy have been taking their toll on UK households.

The base rate rise is the seventh consecutive rise, from 1.75% to 2.25%, and it now marks the highest level of interest rates since 2008.

Rising interest rates can put borrowers at serious risk, with a new report* finding that if interest rates hit a 5% rise, over 25% of mortgage holders may find it difficult to keep up with payments and could potentially lose their biggest asset.

But what does this mean for you?

If you are on a fixed mortgage, very little, however, if you are one of the 2.2 Britons on a standard variable rate, discount, or tracker mortgage, you may need to get out your budgeting book to start re-calculating your finances.

The rise will directly affect your mortgage, depending on the deal you’re on and your provider – you could be left to pay hundreds of pounds extra a year. For example, for those on a tracker mortgage, a 3% interest rate would now rise to 3.5%, adding £38 a month to a £150,000 repayment mortgage with 20 years remaining.

For those on a standard variable rate mortgage, things are a little less straightforward, as the rises are dependent on the lenders but it is expected that these will also rise.

What about those looking for new mortgages? Well, unfortunately, the new base rate will mean higher borrowing costs, but that’s why we have a great team of expert mortgage advisors to help you with whatever situation you are in.

Right now, we are seeing a huge influx of banks reacting to the new Prime Minister's announcements, so our suggestion is to seek professional advice from one of our expert mortgage advisors at Mortgage Matters Direct. 

 

*Property 118