Commenting on the increase in the Bank Rate from 1.0% to 1.25%, Paul Broadhead, Head of Housing and Mortgage Policy at BSA, said:
“Another increase in the bank rate, the fifth since December, will be bad news for many owners. With about eight in ten fixed-rate mortgage holders, it will take time for these increases to be felt by most borrowers, as they will continue to pay the same amount each month until the end of their current contract.
“The financial impact of a new mortgage might be less than people expect, although I understand that any increase in monthly expenses given the rising cost of living will not be welcome. It will likely cost up to £80 more per month for those who, at the end of a 2-year fixed rate, re-mortgage for a similar new contract. For those on 5-year fixed rates, their remortgage will likely increase their payments by almost £35 a month1.
“Lenders are sensitive to the growing number of people facing tight family budgets. Anyone concerned about their ability to repay their mortgage should contact their lender promptly. Lenders will do all they can to help you.
1. Based on a mortgage of £130,000 with a term of 25 years. It compares the rate of the loan 2, 3 or 5 years ago (depending on the term) to that available now (May 2022) on the same basis, i.e. assumes that 2 years fixed will be remortgaged on another 2 years fixed at the same LTV and for the same £130k.