BSA comments on the increase in the Bank Rate to 4%
Commenting on the increase in the Bank Rate from 3.5% to 4.0%, Paul Broadhead, Head of Mortgage & Housing Policy at the BSA said:
“Another Bank Rate rise, the tenth since December 2021, will be unwelcome news for many homeowners.
“Although 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. For example, it’s likely to cost those at the end of a 2 year fixed rate who re-mortgage to a new similar deal around £200 more a month. For those on 5 year fixed rates, their re-mortgage is likely to increase their payments by around £160 a month1.
“Whilst we have not yet seen an increase in borrowers with mortgage arrears, lenders are sensitive to the rising number of people facing a squeezed household budget and will do everything possible to help each borrower. Anyone who is worried about their ability to pay their mortgage should therefore get in touch with their lender as soon as possible.
“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. Although house prices have started to fall, they may still need to lower their ambitions as they’re unlikely to be able to borrow at the level they might have achieved 12 months ago.”
1Based on a £130k mortgage for 25yr term. It compares the rate on the loan 2 or 5 years ago (depending on term) to the one available now (based on latest data - December 2022) on the same basis i.e. assumes 2yr fixed will re-mortgage onto another 2yr fixed at the same LTV and for the same £130k.