MORTGAGE rates are already soaring after the the Bank of England hiked interest rates to 1.75% yesterday.
The hike to the base rate of interest is the steepest rise seen in over 27 years.
The Bank of England increased the base rate of interest by 0.5 percentage points.
The base rate of interest was at a historic low of 0.1% during the pandemic, but has since been increased six times as the Bank tries to tackle inflation.
And anyone on a variable or tracker mortgage will be the first to feel the effects of the increase.
The Sun was the first to reveal that Santander would be hiking its standard variable rates by 0.50%. This change will also affect all Alliance and Leicester mortgages and with rate rising from 5.49% to 5.99% at the beginning of September.
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Barclays will also hike its standard variable rates by 0.50% from 5.74% to 6.24% effective on September 1.
HSBC and First Direct have confirmed that their standard variable mortgage rates will remain at their current levels for the time being – priced at 4.45%.
These mortgages are linked to the Bank's base rate – so when it goes up, so do your monthly repayments.
There are around 1.9million homeowners with these mortgages.
The latest hike is expected to add £888 a year on to their repayments.
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That's based on a £250,000 mortgage with a 25-year term, according to figures from broker L&C Mortgages.
But for many people, the impact will be even greater.
The bigger your mortgage, the more your repayments will go up when interest rates rise.
Those looking to get a new fixed rate mortgage will also be affected – average interest rates on a two-year deal have gone up as much as 166%.
How much will my mortgage payments go up by?
Exactly how much you pay will depend on your mortgage deal, the size of your loan, and your mortgage term.
According to L&C, a typical variable mortgage rate was 4.74% when the Bank of England's base rate was 1.25% before today's rise.
On a 25-year £100,000 mortgage, that means monthly repayments of £569.
But with base rate at 1.75%, monthly payments will shoot up to £598.
That's £29 extra a month, or £349 more a year.
Laura Suter, head of personal finance at AJ Bell, said: "We’re odds-on to see the biggest increase in interest rates since 1995 as it’s widely expected that the rate setters will hike rates by 0.5 percentage points.
“The move by the Bank will pile more misery on the 1.9million people with variable rate mortgages as they battle the rising cost of living."
If your mortgage is bigger, you'll feel the effects even more.
Monthly repayments on a £250,000 variable mortgage will rise from an average of £1,424 to £1,496 after the rate hike – an extra £873 a year.
Those with a £400,000 variable mortgage will see repayments rise from £2,278 a month to £2,394 – an extra £1,397 a year.
Can I avoid future mortgage rate hikes?
If you are currently on a variable or tracker mortgage rate then it's too late to do anything to beat yesterday's hike.
And while it may seem like the prime time to fix, some experts say that rather than locking in a rate in the days after the hike, you might be able to get a better deal in a couple of weeks when the market has calmed down.
Either way, locking into a fixed rate deal will give you certainty over your repayments for a set period of time and protect you from future rate hikes.
Nicholas Mendes, mortgage technical manager at mortgage broker John Charcol, previously told The Sun: "For those who are currently on a lenders SVR, fixed rate or lenders discount rate due to expire in the next six months, don’t delay speaking with your lender or a broker to get a new deal in place before the cost continues to increase.”
If you have six months left on your mortgage on a fixed rate, and don’t want to pay an early repayment charge to switch to a new deal, you can fix a deal six months in advance with many lenders.
Remember, if you are thinking about getting a mortgage, you should always shop around to see how prices differ.
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Price comparison sites like Compare the Market can help you find out how much lenders are willing to give you.
You should always be really careful when taking out a mortgage, and make sure you can repay whatever you borrow.
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