Mortgage warning: YOUR bill could SURGE by £750 when interest rates increase, experts say
BRITISH households will see their mortgage bills surge when interest rates rise, experts warned amid expectations the Bank of England could hike as soon as November.
Homeowners will see mortgage repayments rise by an average £750 if the base rate is lifted from 0.25 per cent to 0.5 per cent, according to lender Freedom Finance.
The Bank of England has this week said interest rates could rise in the coming months - but many people are underestimating the chances of a hike.
Higher interest rates mean the cost of mortgages and credit will rise.
But it's feared unprepared homeowners could face bill shocks.
It's thought a hike could happen in November, as this is when Governor Mark Carney will also present the latest inflation report.
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Families have been urged to now protect themselves from a rise by fixing on to low mortgage deals.
Millions of people have bought homes in the past decade and never experienced a rate rise.
Shaun Church, director at broker Private Finance, said: “When rates do eventually rise, it will be first time over two million people have experienced this as a mortgage holder, and more rises are likely follow.
“However, while today’s rock bottom mortgage rates can’t last forever, further base rate rises are likely to be gradual and mortgage rates won’t necessarily rise at the same rate.
"Healthy competition between lenders should ensure that mortgage pricing remains low for some time yet. Homeowners therefore have plenty of time prepare for a slight increase in pricing in the coming years.”
According to Freedom Finance the average family has a £130,000 mortgage on a 19-year term - and a one per cent rise on a lending rate of two per cent would mean an extra £756 a year.
Andrew Fisher, managing director of Freedom Finance, added: “Anything which adds costs to the family budget will have an impact, and for many people even a modest increase can significantly erode disposal income.
“While it’s unlikely that we’d see an increase of one per cent in one month, it’s perfectly conceivable that in the space of only a few months many people in the UK will have to factor in a substantial extra cost."