This isn’t quite the horrible news many would think, says AJ Bell’s Sarah Coles.
Almost nine in 10 mortgages are fixed-rate deals, which are protected from today’s rise.
She continued: “If you’re up for remortgage in the near future, this isn’t quite as horrible news as you might think. Competitive fixed rates have been holding relatively steady in recent days, and some have actually fallen, as the market is pricing fewer rises into deals further down the line.
“Because this particular hike had already been priced in, it’s unlikely to move the dial significantly for anyone wanting to switch to a fixed rate mortgage.”
The real pain, however, will be reserved for people on variable rate deals, who will see rates move with the Bank of England.
UK Finance has calculated that a 0.25% increase to the base rate would cost the average person on a tracker rate around £31 a month.
However, if you have a larger mortgage, the impact will be bigger, so someone with a £300,000 repayment mortgage over 25 years on a current rate of 4.84% might be paying £1,726 a month at the moment. After the hike, those repayments could rise by £44, according to MoneySuperMarket.
Ms Coles continued: “Some people may have opted for a variable rate because they have been cheaper for a while. They will have known it was always likely to rise, but they decided to take the risk in the hope it would be cheaper than a fixed rate overall.
“Others will be stuck on the standard variable rate and subject to a hike in an already hideous rate. If you’re stuck because your circumstances have changed and you’re worried you won’t pass affordability checks for a new deal, it’s worth speaking to your existing lender, who may allow a transfer.
“You might not get the best possible deal on the market, but it should at least be less painful than a standard variable rate mortgage.”
