Although it’s good news for savers who might now see more attractive options come onto the market, it’s not so good for borrowers. With many experts claiming it could be the first rise of many, Britons are being urged to take action.
Even though a 0.15percent rise sounds small, a quarter of UK mortgage holders who are on a variable, tracker or standard variable rate, will see their costs increase.
UK Finance has estimated that around 850,000 mortgage borrowers are on tracker rates and around 1.1 million borrowers are on their lender’s standard variable rate (SVR).
Yesterday’s hike by the Bank of England could see their repayments go up by potentially hundreds of pounds a year.
In real terms it means that a homeowner on a 3.5 percent Standard Variable Rate, will see their payments on a 25-year £200,000 mortgage rise by £180 a year.
Campaigners are worried that this will cause misery for thousands of mortgage prisoners who can’t move deals because their circumstances have changed.
Mortgage prisoners are homeowners stuck on pricey mortgage deals, unable to switch to cheaper ones mainly because they no longer meet affordability tests.
A spokesperson said: “A rate increase will ultimately push more repossessions and cause more families to suffer in poverty.
“Mortgage prisoners will be most affected, and they are the ones who have been treated so unfairly for so long.”
The action group has been eagerly awaiting the Financial Conduct Authority Mortgage Prisoner Review, but has been disappointed with the results.
The spokesperson added: “This review has highlighted that the FCA, treasury and UK finance have failed UK borrowers.”
Campaigners say that out of the 47,000 mortgage prisoners who have already received help through the FCAs modified affordability rules introduced in 2019, only 200 have remortgaged.
Another 118,000 mortgage prisoners remain vulnerable, because the FCA has changed the definition of a mortgage prisoner.
Yesterday, the nation’s favourite financial guru, Martin Lewis said: “While the rise itself isn’t huge, the signal is.
“By increasing interest rates, the theory says you encourage saving and discourage borrowing, taking cash out of the economy, and slowing things down.
“For variable rate mortgage holders, the typical £8 per month rise per £100,000 of mortgage, will be far from welcome amidst the other huge price rises we’re seeing in energy bills and fuel.
“So it’s important, especially for those on the standard variable rates (SVR), where lenders have the freedom to increase rates by more than the 0.15 percent – to see this as a spur to check if you can save by getting a better mortgage deal.”