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Bank of England base rate up

Thursday 02 November 2017

Interest rates in the UK are set to rise as the Bank of England increases it's base rate for the first time in a decade.

Back in September, the Bank's Monetary Policy Committee hinted at an increase over the coming months. Now in what has come as a major blow for many homeowners, the Bank of England have upped the base interest rate from 0.25 per cent to 0.5 per cent.

The immediate impact will see tracker mortgage holders most affected as their deals will automatically increase in line with base rate, however variable rates are likely to follow suit. And whilst those on fixed rate deals are safe for the time being, the rise is likely to hit them when their term comes to an end.

Lloyds, Barclays and Halifax have already hiked the cost of tracker and standard variable mortgages, with both HSBC and NatWest increasing the interest rate for their tracker mortgages.

The figures show that based on a two per cent tracker on a £200,000 mortgage, monthly payments will rise from £739 to £764 while for a £250,000 mortgage borrowers will see an increase from £924 to £955. Overall, homeowners are facing an average increase of £22 a month, or £264 a year.

But whilst the increase may seem minimal in many cases, the latest findings from the Financial Conduct Authority revealed that one in six borrowers would struggle if their mortgage repayments were to rise by just £50 a month.

This is likely to be the first of a number of rises of the next five years, continuing with another 0.25 per cent rate rise in 2018, with forecasts indicating it could reach 2.25 per cent by 2022.