Urgent mortgage warning for millions of homeowners as Bank of England hikes interest rates AGAIN to 2.25%

MILLIONS of households have taken a hit today when the Bank of England raised interest rates for the seventh time in a row.

the Bank of England he has walked Interest rates at 2.25% as the British economy warns will go into recession at the end of this month.

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Mortgage holders will see their rates rise in a few days

But the rise of 0.5% is lower than expected, which gives some relief to borrowers.

the Bank of England has raised interest rates to levels last seen in the financial crisis.

Economists had expected a 0.75% rise as the BoE tries to tackle high inflation.

However, the Bank of England said government relief in energy bills it meant that costs would be less of a driver of inflation than before.

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Lifting Interest rates it’s meant to encourage people to save, rather than spend, which in theory should help rein in runaway inflation.

The Bank of England now waits inflation to a high of 11 percent this October, compared with its previous forecast of 13.3 percent in August.

This would mark the higher inflation the UK has been a witness since January 1982.

the central bank it has already raised the base rate six times this year.

It is an increase of the previous one. rate of 1.75%and the banks are ready to pass the last increase to the borrowers.

The measure will make the cost of loans, including we lend, Credit cards Y mortgage more expensive refunds.

And it means more misery for households already dealing with a cost of living crisis.

Exactly how much more your bill will be depends on the type of mortgage you’ve got.

About 800,000 homeowners in a mortgage tracker directly tied to the base rate you will see an immediate increase.

Nearly 2 million in standard variable rates are likely to see their rate increase soon, as banks they often increase over days or weeks, although you should give them advance notice.

Laura Suter, personal finance analyst at AJBell, said: “For the 1.9 million who are exposed to mortgage rate increases, the annual cost will increase significantly now that the Bank has raised rates by 0.5 percentage point.

“The average UK homeowner has £131,000 in mortgage debt, according to UK Finance, so those with a follow-on contract will see their mortgage costs increase by £396 a year.”

The exact increase will depend on how much you’ve borrowed and what rate you’re at.

Those with a fixed rate are safe for now, but face a big increase in borrowing costs when it comes to remortgaging.

About 2.2 million borrowers are expected to reach the end of a deal they arranged when the base rate was at a record low of 0.1%.

In a fixed offer, you lock in a rate for a certain period of time that keeps payments the same.

But those looking to remortgage as their existing agreement is about to expire are facing “mortgage shock.”

Alice Haine, personal finance analyst at BestInvest He said: “Fortunately, three-quarters of mortgage holders have fixed-rate offers, so they’re protected for now, but anyone with an offer that’s due to expire within the next six to eight months should look into a new fixed-rate “.

Take someone who got a two-year fix on a 25-year mortgage on a £250,000 house in September 2020.

They would have amortizations of 1,089 pounds sterling per month and with an average rate at that time of 2.24%.

After that deal expires, by moving to the standard variable rate, which currently sits at an average of 5.4%, your refunds would rise to £1,489 per month, £400 more.

If the lender passes the expected base rate increase, repayments could rise to £1,593, an increase of £504 per month.

How to avoid overpaying for your mortgage

Anyone who reaches the end of their fixed deal needs to act fast, as moving to lenders’ standard rate is often the most expensive form of loan, Alice said.

“However, with more rate hikes to come this year and next, it would be wise to seek advice as this is a very fluid landscape.

“Finding the right product to fit your future plans is crucial, as you lock in five or 10 products if you have ambitions to pay off your mortgage early or want lower payments if better rates come along in the future.”

If you find a good deal, get it quickly, says Alice, as many banks and building societies are withdrawing products from the market as demand increases.

You can lock in rates with some lenders up to six months before your deal ends.

Leaving a fixed offer early usually carries an early exit fee, so you want to avoid this additional cost.

But depending on the cost and how much could you save by switching versus stayingit might be worth paying to get out of the deal, but compare the costs first.

Overpaying your mortgage could also be an option to cut costs, if you can.

Alice said: “For those lucky enough to have extra money, overpay on your mortgage now to lessen the blow when your renewal date comes around.

“This could help secure a better deal later on, particularly if it moves down a loan-to-value band, say 80% to 75%.”

How to get the best deal on your mortgage

Getting the best rate on your mortgage may depend on the available rates at that time, but there are several ways to get the best deal.

Usually the bigger deposit have, the lower the rate you can get.

If you’re remortgaging and your loan-to-value ratio has changed, this could also give you access to better rates than before.

A change in your credit score or a better salary could also help you access better rates.

To find the best deal, use a mortgage comparison tool to see what is available.

You can also go to a mortgage broker who can shop for you, but you may have to pay for this service.

It might cost a couple of hundred pounds, but it could save you thousands on your mortgage overall.

You’ll also need to factor in mortgage fees, although some have no fee at all, or you can add it to the cost of the mortgage, but be careful, that means you’ll pay interest and therefore cost more. long-term.

You may use a mortgage calculator to see how much you could borrow.

Remember that you will also have to pass the lender’s strict eligibility criteria, which will include affordability checks and review of your credit file.

You may also need to provide documents such as utility bills, proof of benefits, pay stubs from the last three months, passports, and bank statements.

What does an interest rate increase mean for my debts and for borrowing money?

The cost of borrowing through loans, Credit cards and overdrafts it has already risen as banks have moved past recent hikes.

Certain loans you already have, like a personal loan or car financing, will generally stay the same, since you’ve already agreed on the rate.

But rates on any future loans could be higher, and lenders could increase credit card rates and overdrafts, though they must tell you in advance.

You can cancel a credit card if you wish and you will have 60 days to pay any outstanding balance.

What does an interest rate hike mean for my savings?

Savers are feeling some relief as interest rates are rising slightly for those with cash in the bank. here are the best rates you will find.

A rate increase is generally good news for savers especially after a long period of getting very low rates on your money.

Along with low rates, high inflation can erode the value of any savings you have.

So if you have £100 in the bank this year and inflation is 10%, the real purchasing power of that money drops to £90 next year.

Another rate hike could see banks pass on higher rates to savers, though they are typically much slower to act than passing higher rates on loans.

This means that savings rates are more likely to rise slowly rather than change immediately.

Anyone currently getting a low rate on easily accessible savings might find it worthwhile to shop around for a better rate after any rate increase and move their money.

What happens when there is a recession?

A country is in a recession when its economy contracts for a sustained period of time, instead of growing normally.

It’s calculated using something called Gross Domestic Product (GDP), which in the UK is the value of all goods and services added together in pounds.

Generally speaking, if GDP has fallen for two quarters (or six months), a country is said to be in a recession.

The central bank had previously projected the economy to grow in the current financial quarter, but said it now believes gross domestic product (GDP) will fall 0.1%.

It comes after a reported 0.2% drop in GDP in the second quarter and would mean the economy is currently in recession.

job losses they are a common symptom of a recession, as companies try to cut costs to stay afloat.

Companies can also go into administration or go bankrupt.

The 2008 recession, for example, saw the loss of major stores including music retailer Zavvi, clothing store Principles and stalwart Woolworths.

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The government may cut or raise taxes to try to shore up its finances; alternatively, you may decide to increase budgets to get out of trouble.

Yes inflation skyrockets – as it stands at the moment – people will find that their wages cannot be kept up and their money does not go as far as it used to.

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