Cornerstone Tax: BoE raise interest rates for the 11th time in a row affecting mortgages

Cornerstone Tax: BoE raise interest rates for the 11th time in a row with over a million mortgages set to be affected.

The Bank of England has hiked interest rates by 0.25 percentage points – pushing the benchmark rate to 4.25% up from 4%. An unexpected increase in the rate of inflation yesterday, which saw the rate rise from 10.1% in January to 10.4% in February, contributed to the rise.

The rate was already at its highest level for 14 years and now the impact of this rate rise is set to be felt by borrowers as mortgage and loan costs are set to be higher. When interest rates rise, around 1.6 million people on tracker and variable rate deals will see an immediate increase in their monthly payments. The increase of 0.25 percentage points today means that homeowners on a typical tracker mortgage would pay around £24 more a month as those on standard variable rate mortgages face a £15 increase.

Group Chairman of Cornerstone Tax, David Hannah, discusses the impact of the rise in interest rates on UK households:

“In the short term, today’s announcement from the Bank of England to increase interest rates by 0.25 percentage points to 4.25% will have a detrimental impact on those who are currently on variable mortgages, and it may lead to people running into genuine financial difficulty. 

“It is also set to affect first-time buyers who may now be unable to make a first step onto the housing ladder due to unaffordable mortgage rates.

“This will also be a cause for concern for those who are coming to the end of a fixed-term deal as their repayments will also increase.

“Today’s announcement will have a knock-on effect on the rental market too – it has already been suffering from a lack of supply, and now, with a growing number of would-be buyers in need of a place to live, this is going to be exacerbated further.

“The result of this is that rental prices and competition will likely increase at a time when people are already struggling.

“With all of this said, my outlook for the second half of this year is much more positive and I think mortgage rates will fall alongside inflation which should bring affordability back to more normal levels.”

Kindly shared by Cornerstone Tax

Main article photo courtesy of Pixabay