If you have been following the latest mortgage interest rate news, you will know that the Bank of England has voted to increase the base interest rate by 50 points in the last few weeks so it now resides at 1.75%. This is the highest increase in the last 27 years and homeowners and first time buyers are naturally unsettled by the developments. If you are not sure where you stand right now with your existing or potential new mortgage, read on for how the new rates might affect you.
Existing Mortgages
How the rise will affect your existing mortgage wholly depends on what kind of mortgage you are on right now. If you are on a variable rate mortgage or SVP which follows the base rates at your lenders discretion or a tracker mortgage which directly follows the main base rate then you are likely to see the impact of the rise in interest rates immediately. If you have a fixed rate mortgage then your repayments will remain the same for now and will rise as your fixed rate term comes to an end.
First Time Buyers
The impact for first time buyers at the moment is significant as the base interest rate has risen and house prices have gone up by around 11% recently. If you are a first time buyer then you should expect to be repaying 20% more on your monthly repayments than if you had applied for your mortgage back in January of this year.
What’s Coming Next?
Although house prices and interest rates look like they are going to continue to rise as we move through the second part of 2022, things are changing when it comes to mortgages as the Bank of England announced on the 1st August that a key affordability test has been discontinued, meaning potential homeowners will find it easier to take the first step on to the property ladder, although the regulation stating that lending is limited to a maximum of 4.5 times the borrowers income will remain in place to avoid people borrowing more than they can afford to pay back.
Are you an existing mortgage customer or a first time buyer wondering how the latest increase will affect your specific circumstances? Our experts are on hand to discuss this with you in more detail. Please contact us here for more information.