What does the Bank of England hiking interest rates mean for my mortgage?

Millions of households should expect to see their mortgage repayments increase (Picture: Getty)

The rise in interest rates is a ‘recipe for disaster’ as households face paying up to £5,000 more a year, an expert has warned.

The Bank of England today voted to increase their base rate from 4.25% to 4.5% – its highest level since 2008.

This figure is used by banks and other lenders to set mortgage rates offered to their customers.

Exactly how much more people can expect to repay depends on whether their plan was fixed or not, the size of the mortgage and the new rate.

It is the central bank’s twelfth hike since December 2021, when the rates were at historic lows.

The bank is hoping to lower inflation levels from 10.1% to 2% by the end of the year, with chancellor Jeremy Hunt saying unless they tackle rising prices, ‘the cost-of-living crisis will only carry on’.

Now an expert has warned the rise will ‘inflict pain’ on millions of homeowners across the UK as they struggle to make ends meet.

Amit Patel, adviser at Trinity Finance, told Metro.co.uk: ‘Today’s announcement by the Bank of England to raise the base rate to 4.5% is a recipe for disaster.

Jeremy Hunt said the ‘cost-of-living would carry on’ if they didn’t tackle rising prices (Picture: Reuters)

‘People are already struggling with the cost of living crisis and wages have not risen in real terms.

‘Brexit and the back end of Covid has compounded this all and the latest hike will inflict more pain and misery on borrowers up and down the country.

‘This will push more people into debt and poverty.’

The 1.4 million homeowners whose mortgages directly track the base rate could face a total average annual bill hike of £5,000 – which they will begin paying immediately.

Meanwhile, households coming off the average 2.58% fixed rate available in 2021 will see their mortgage payments rise by £13,000 a year if they’ve taken out a £250,000 loan, according to financial company AJ Bell.

Mr Patel said: ‘Borrowers who are on a tracker or variable rate (SVR) mortgage will see their repayments increase immediately.

‘Those who fixed their mortgages and loans at lower rates will face the stark reality of their monthly payment being hit as their costs will increase significantly.

‘The Monetary Policy Committee needs to get a grip and stop increasing the base rate, as it’s not working and is simply inflicting pain on millions of households.’

The Bank of England raised interest rates to the highest level since 2008 (Picture: Thomas Krych/ZUMA Press Wire/Shutterstock)

The main piece of advice Mr Patel could offer to homeowners worried how they will afford their mortgage repayment, was to be ‘savvy’ in their spending.

He said: ‘People should review their personal expenditure against their income to see where savings can be made.

‘This includes looking at how much gym memberships or Sky TV packages are costing.’

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‘This will push more people into debt and poverty.’