Commenting on the increase in the Bank Rate from 1.25% to 1.75%, Robin Fieth, Chief Executive of BSA said:
“Another increase in the Bank Rate, the sixth since December, will be bad news for many homeowners. But with about eight in ten fixed-rate mortgage holders, it will take time for these increases to be felt by many borrowers, as they will continue to pay the same amount each month until their current contract ends.
“When these fixed rates end, most will choose to either re-price with their current provider or search the market. While rates remain relatively low, we have seen fixed rates rise sharply since December 2021 and borrowers will need to consider the impact of the rate increase alongside all other increasing demands on their monthly income.
“It will likely cost those who, at the end of a 2 year fixed rate, remortgage to a similar new contract around £100 more per month. For those on 5-year fixed rates, their remortgage will likely increase their payments by around £60 a month1.
“Lenders are sensitive to the growing number of people facing tight family budgets. Anyone worried about their ability to pay off their mortgage should contact their lender as soon as possible and they will do all they can to help.
1Based on a £130,000 mortgage with a term of 25 years. It compares the rate of the loan 2, 3 or 5 years ago (depending on the term) to the one available now (June 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.