What the Bank of England rate rise means for your mortgage | The Sun

THE Bank of England (BoE) has hiked interest rates to their highest level in 14 years – we explain what it means for your mortgage.

The bank's base rate has gone up from 3% to 3.5%, as was expected.

It's the ninth consecutive time it's raised interest rates to try and tackle soaring prices and follows a 0.75 percentage point hike in November.

The move will make the cost of borrowing, including loans, credit cards and mortgage repayments more expensive.

So while the hike is good news for savers as they get better rates on bank accounts, it means an increase in mortgage rates.

We reveal what today's announcement means for your monthly mortgage repayments.

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What the rate rise means for mortgages

Usually, banks will hike mortgage rates when interest rates go up.

But what today's hike means for you will depend on what type of mortgage you're on.

David Hollingworth, from mortgage brokers L&C, said the outlook for mortgage borrowers was "mixed".

Standard variable rate

Homeowners on standard variable rate mortgages won't see their repayments go up straight away, but they will likely increase shortly after today's hike.

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Your bank should tell you about a change to your SVR before it goes up.

SVRs are generally higher than fixed rate deals, so if you're on one then you're likely to be paying more than you need to already.

David said homeowners on an SVR could see their monthly payments climb by £47 based on a £150,000 25-year repayment plan.

He said: "That could add more than £560 to annual mortgage costs at a time when other costs have also been climbing, piling pressure on household budgets."

TotallyMoney said for households borrowing £250,000, their monthly payments will go up by £62 – or £744 a year.

Fixed rate

If you're on a fixed-rate mortgage, the increase won't immediately affect your payments.

Rates on these types of mortgages have shot up in recent months, but then started falling and recently dipped back below 6%.

The average two-year fixed deal is 5.84% and the average five-year deal sits at 5.67%, according to Moneyfacts.

But this is still far higher than the average rate of 2.34% a year ago.

David said today's base rate rise will have been "well anticipated" and so rates aren't likely to go up sharply in the immediate term.

He said: "More competition in the market and stable funding conditions is now feeding through to borrowers and widening the gap between SVR and fixed rates."

He added: "Those looking for some peace of mind will find fixed rates more attractive than only a month ago."

Tracker rates

Tracker mortgages are linked to the BoE base rate – which means you will see an immediate impact on your mortgage repayments after today's hike.

So if you're on one, you should factor that into your monthly outgoings.

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David said: "Trackers will clearly climb in line with base rate so it’s important to have enough flex in the monthly budget to cope with increases."

He added some trackers with no early repayment charges can enable borrowers to jump onto a fixed rate mortgage if their payments spike.

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