The Bank of England increased interest rates by 0.25 per cent on the 2 November – the first rise since the housing bubble burst in 2008.
As the news swept through the nation, there was one big question on everyone’s mind: ‘can I afford the interest rate rise?’
Lloyds Banking Group, the Royal Bank of Scotland (RBS), and Santander are among the many lenders who have already mirrored the rise by hiking their own interest rate charges.
Consequently, around 4.5 million homeowners can expect a small but potentially painful rise in their tracker and variable rate mortgages, which follows the Bank of England’s base rate.
It will mean that a household which owes £89,000 will see a rise of between £11 and £12 a month. Meanwhile, someone who owes around £300,000 will see increased repayments of around £39 a month, or £468 a year.
Higher interest rates also tend to have an impact on the wider housing market, by reducing borrowing and stifling house price growth.
Mike O’Connor, Chief Executive of StepChange Debt Charity, estimated that one in 10 of its clients with a mortgage will end up with a deficit budget.
He added: “With incomes already squeezed, even having to pay £20 more on average per month on a mortgage after today’s rise could push people who are just holding on by their fingertips from paycheque to paycheque, into the red.”
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