Mortgages: Bank of England raises interest rates to 1% — here’s what it means for you

After the Bank of England raised interest rates to their highest level in 13 year, Londoners will have a harder time getting on the housing ladder. The Bank of England’s decision of increasing interest rates by 0.25 percent will cause an immediate increase in housing costs. This will affect roughly one in four homeowners with tracker, discount, or variable rate mortgages. However, it will not make a difference to first-time buyers as the cost of borrowing will rise. Chris Pitt, CEO of First Direct, stated that today’s hike will put more pressure on many home owners’ already stretched monthly budgets. First-time buyers’ dream to own a home could be delayed. Rachel Springall, Finance Expert at said that the rise in interest rates would be “disappointing news for consumers who are already facing a crisis in their cost of living.” Additional increases are expected over the next 12 month. “Aspiring homeowners may have to rethink their ability to afford to move onto the property ladder because of rising costs and soaring home prices,” she said. Rachel Springall, Finance Expert at, stated that while most homeowners are able to take advantage of fixed-rate mortgages, first-time homeowners will be hurt. “Once more, it’s first-time purchasers who seem to be the most affected by rising rents and stricter lending criteria. They are crucial to the success of the housing market. They are not only at the bottom, but also connected in chains to the top. “House-hunters may need to increase their deposits or explore other lending options in order to get better interest rates. Habito’s CFO Martijn van der Heijden advises house-hunters that they make sure they have all the documents necessary to secure a deal. Lenders are withdrawing the cheapest deals quickly because mortgage rates have risen in recent months. Your broker could recommend rates that are not compatible with your documents. What will it mean for my mortgage? Borrowers who are on a standard variable rate, discount deal, or base rate tracker mortgage will see an immediate increase in their payments. This is approximately 20-25 percent of UK mortgage holders. Fixed rate mortgage holders who are currently locked into their current rate won’t see any change in their rates. However, homeowners who have fixed-rate mortgage deals will not be affected immediately. They will need to pay higher rates if they want to remortgage, especially if they have two-year tracker agreements. Experts say lenders are increasing mortgage rates without notice or warning. Mark Harris, chief executive at SPF Private Clients mortgage broker, stated that this is making it difficult for borrowers because any hesitation could mean “missing the best deals”. While 2- and 5-year fixes are more common, the rise in interest in 10-year deals is a sign that homeowners are becoming more concerned about rising interest rates. “First-time buyers face other challenges. First-time buyers face other difficulties, such as rising house prices and a lack of supply. Alex Lyle, director at Antony Roberts’ Richmond estate agency Antony Roberts said that the recent rise in interest rates “unlikely” to have a significant impact on buyers, especially not in our area of London. “Continued shortage of stock is more of a problem. Buyers are currently anxious about the lack of stock, not rising house prices or high mortgage rates, but about limited options. Buyers who require a mortgage understand that although rates are increasing, they are still extremely low. Despite this, the regular rises in interest rates, the almost weekly adjustment of mortgage rates and the rise in the cost to live will have an impact on the housing market. “Mortgages nowFirst Direct offers 2.29 percent for borrowers who have a 25% deposit and are looking to fix their mortgages for two years. The 2.29 per cent rate from First Direct is the best available for borrowers with a 25% deposit. This rate is good for two years. Savills’ head of residential research Lucian Cook said that it was difficult to see the trigger to a “meaningful price correction” due to the supply crisis, strength in the labor market, and historical low interest rates. “This means that the four consecutive rate increases and the rising cost of life are likely to cause more caution over the coming months. SUPPLY SQUEEZE: Aspiring buyers claim that the lack of homes for purchase is a bigger problem than high prices. Buying a house in 2022: Why are there no homes for you to buy? “This will likely be a relief for would-be buyers. Many of them will feel that they have been chasing this market for the past two years, having experienced intense competition to buy the stock. Dominic Agace, chief executive at Winkworth estate agents, said that while today’s interest rate rise is likely to be absorbed by the market, future increases in interest rates could have an effect on demand further down the road. He said: “With additional interest rate increases predicted for the year we do expect this will affect demand later in 2012, in particular among those who require higher loan to values mortgages – usually first-time buyers. This could slow down price growth in areas that are supported by these buyers. With lower disposable income margins and higher interest rates, affordability will be affected.