BSA comments on the increase in the Bank Rate to 3.5%
Commenting on the increase in the Bank Rate from 3.00% to 3.5%, Paul Broadhead, Head of Mortgage & Housing Policy at the BSA said:
“Another Bank Rate rise, the ninth since December 2021, will be unwelcome news for many homeowners, particularly as this is alongside the rising cost of energy, fuel, food and other items.
“Whilst the majority of borrowers are on fixed rates, so will not feel the impact of the rate increases until their fixed rate ends, when they do their new rate is likely to be significantly higher than their current fixed rate. Borrowers will therefore need to consider the impact of higher mortgage payments alongside all the other increasing demands on their monthly earnings.
“It’s likely to cost those at the end of a 2 year fixed rate who re-mortgage to a new similar deal around £289 more a month. For those on 5 year fixed rates, their re-mortgage is likely to increase their payments by around £244 a month1.
“Whilst we have not yet seen an increase in borrowers with mortgage arrears, we remain alert to the economic conditions, which are rapidly changing. It’s worth noting that lenders are sensitive to the rising number of people facing a squeezed household budget and have teams who are well trained and experienced in providing tailored support to those who are struggling. Anyone who is worried about their finances and ability to pay their mortgage should therefore get in touch with their lender or a debt adviser as soon as possible. They will provide a safe space for a confidential, non-judgmental chat and will do everything possible to help each borrower with options based on their own personal circumstances.
“For first time homebuyers, the rate rises are having an immediate impact as the higher cost of a mortgage, alongside the rising cost of living, will affect their overall affordability. Those taking their first step onto the housing ladder should therefore seek advice from a lender or mortgage broker, as they may need to lower their ambitions as they’re unlikely to be able to borrower at the level they might have achieved 12 months ago.”