Mortgage misery as borrowers on tracker deals face typical £30 rise in payments

Homeowners on tracker mortgage rates will typically see an increase of around £30 to their monthly mortgage payments, after the Bank of England raised the base rate by 0.25 percentage points.The increase on Thursday took the base rate from 3.75% to 4%, in the first rise in interest rates in more than three years.Based on typical outstanding mortgage balances, UK Finance said the increase for those on tracker deals would be £30.72 on average.According to UK Finance, 510,000 outstanding homeowner mortgages are trackers, making up around 6% of the total.A total of 470,000 deals are on standard variable rates (SVRs), which homeowners may end up on when their initial deal ends. SVRs are set by individual lenders.If the lender decides to pass on the 0.25 percentage point base rate increase in full, the average homeowner on an SVR will see their monthly payments increase by £14.28.Around nine in 10 (87%) outstanding homeowner mortgages are fixed rates.While people on fixed-rate mortgages will not feel the immediate impact of the base rate hike on their home loan, many homeowners will have to consider their options in the months ahead.Around 700,000 fixed-rate mortgages are expiring at some point in the second half of this year.A further 2.3 million fixed-rate deals are due to expire in 2027, according to the analysis by UK Finance.The finance industry body is encouraging anyone who believes they may struggle with increased payments to contact their lender, where teams of experts should be standing by to offer support.Andrew Montlake, chief executive of Coreco mortgage brokers, said: “For households, this is another turn of the financial screw.“Tracker borrowers will see payments rise almost immediately, while those coming off fixed deals face a mortgage market already repriced for higher rates.Read More“The key message is not to panic. If your mortgage deal is ending, start early, understand your options and give yourself room to manoeuvre.”Richard Donnell, executive director at Zoopla, said: “Higher mortgage rates have been a drag on housing market activity since the spring, with sales agreed down 8% on last year and this latest increase in the base rate set to make more buyers pause and wait on their home buying decisions.“While there are fewer sales than this time last year, sales that are being agreed are happening just as quickly as a year ago as serious buyers become more selective.“There is demand to buy homes, but sellers need to price their homes carefully to ensure they attract the active buyers.”Emily Williams, director of research at Savills, said: “House price growth is forecast to accelerate to 5.0% in both 2029 and 2030.”Simon Gammon, managing partner at Knight Frank Finance, said: “The Bank of England may be raising rates, but global events will exert the most influence on UK mortgage rates over the coming months.”Jason Tebb, president of OnTheMarket, said: “Serious buyers and sellers continue to engage with each other but with the former having potentially less purchasing power after today’s announcement, the sensible pricing of property coming to market is essential.”Nicky Stevenson, managing director of Fine & Country, said for prospective buyers, “understanding affordability, securing mortgage advice early and allowing some flexibility in monthly budgets will be particularly important in the current environment”.Frances Haque, chief economist at Santander UK, said: “The key question is whether today’s decision is a precautionary move or the start of further increases.“With energy prices facing further increases, inflation expectations rising and wage growth stagnating at levels above those consistent with the 2% target, it certainly looks as if further hikes will feature in 2027.“However, the question about how the economy reacts to all of this will be critical; the resilience it has shown so far has been remarkable, but the tension is mounting.“For the time being, homeowners should prepare for borrowing costs to remain elevated.”While some households will be dealing with larger monthly mortgage bills, the rise in the base rate will give some savers a boost.Jenny Holt, customer savings and investment director at Standard Life, said: “For savers, higher interest rates could bring better returns on cash, although banks won’t necessarily pass on the full increase.“With inflation still elevated, it’s important to consider whether savings are maintaining their purchasing power.“It’s worth checking the rate you’re receiving and whether a more competitive account is available.”Susannah Streeter, chief investment strategist at Wealth Club, said: “For savers, a rate hike could see even more attractive deals land in the market, and it’s really worth shopping around.“Some easy access accounts are already paying in the region of 5%, although the very best rates often come with restrictions, with even better offers available if you can stow away your money for a year or more.“However, rates may not move significantly higher given that the market has already priced in the likelihood of further hikes.”Rachel Springall, a finance expert at Moneyfactscompare.co.uk, said: “Savers must make time to review their old accounts.”Sarah Pennells, a consumer finance specialist at Royal London, said: “Higher rates can be good news for savers, but it’s important to check whether your savings rate has increased and by how much.“Shopping around and checking the rate you’re receiving can make a real difference.“For anyone worried about their finances, now is a good time to take stock of regular outgoings and prioritise building a financial buffer where possible.“If you’re worried about your mortgage payments or are struggling, speak to your lender as soon as you can rather than waiting until you miss a payment.“The earlier you ask for help, the more options may be available.”Some retirees may also potentially see an income boost.Sarah Coles, head of personal finance at AJ Bell, said: “Anyone currently shopping around for an annuity could see rates rise on the back of a bank rate hike, which would improve the income for life they can take from their pension.“Some people consider buying an annuity with some of their pension pot, alongside using income drawdown with the rest of it, so they can combine guaranteed income with flexibility and potential growth.“For these people, now could be a good time to shop around for a generous annuity rate.”