The increase in interest rates is likely to increase the monthly outlays for homeowners across the UK, and millions of property owners could be affected.
With energy bills and the cost of groceries also set to increase in price too, 2022 will pose financial challenges for many households.
Therefore, it is imperative prospective homebuyers and existing mortgage holders undertake due diligence with respect to mortgages. If you are applying for a mortgage to step on the property ladder, you must be as sure as you possibly can be that you can afford what you are committing to.
If you already own property, it is worthwhile speaking with a trusted advisor to determine if there is a better mortgage for you.
The second increase in recent weeks
After a lengthy period of a record-low interest rate level, this increase represents the second rise in only seven weeks.
In December 2021, interest rate rose from 0.1% to 0.25%, and now, interest rates stand at 0.5%.
What it means for homeowners
With the average price of property in the United Kingdom standing at £276,000[i], a homeowner with an 80% loan with a tracker rate mortgage, faces a rise of £552 per year in mortgage payments.
Dividing this by 12 sees monthly payments increasing by £46 a month.
With 74% of mortgage borrowers currently enjoying a fixed-rate deal (according to the BBC[ii]), the vast majority of mortgage holders will only need to worry about higher interest rates when their current term comes to an end. It is believed 1.5 million fixed rate deals will conclude in 2022, and in 2023, a further 1.5 million fixed rate deals will come to an end.
What do financial experts say about the mortgage increase?
Rachel Springall is a finance expert at Moneyfacts.co.uk, and she said; “Mortgage rates are on the rise, and this base rate rise may come as disappointing news to borrowers who are not locked into a competitive rate. Lenders are still launching attractive deals onto the market, so anyone who is still debating on whether to fix may be wise to do so now. Those looking for peace of mind with their mortgage payments over the next few years may wish to consider a five-year or even ten-year fixed mortgage to protect them from future rate rises.”
This suggests that this is still a suitable time to review your mortgage options, and acting soon might be better than waiting to see what happens next. No one should rush into a mortgage, but there is no denying the market might become less appealing as we move throughout 2022 and beyond.
How to explore your mortgage options with The Money Hub
If you are worried about how the latest interest rate increases impact your mortgage hopes in 2022, we are here to help you.
Call The Moneyhub Limited on 0203 725 5830 and speak to one of our highly specialised and dedicated Mortgage Advisors or you can complete an enquiry form which will allow you to schedule a call time.
DISCLAIMER: These articles are for information only and should not be construed as advice. You should always seek advice prior to taking any action.