This is the first change in the interest rate for 11 months and the first rise for two years.
Mark Chilton, Purely Mortgages: “There has been much speculation since the turn of the year about the likely rise at some point during 2006 however now it is here consumers need to be aware of the implications as this may come as a shock given it is the first rise in exactly two years. I also believe that there is a risk of another increase towards the end of the year subject to the state of the international economic climate.”
Somebody with a £150,000 interest only loan on a tracker rate (linked to BBR) of 4.50 per cent will now see their rate increase to 4.75 per cent and subsequently their mortgage payments will rise by £31.25 a month, or £375 over 12 months, says Chilton.
Despite the immediate impact to monthly payments for borrowers on tracker rates, trackers are still extremely competitive, says Chilton. Currently, the market leading tracker is 4.10 per cent compared to the market leading fixed at 4.49 per cent.
However, consumers not on tracker mortgages will not be immune to the MPC decision as lender’s standard variable rates (SVRs) will almost certainly be increasing by a similar or even more significant amount over the next few days or weeks.
Chilton concludes: “Borrowers wondering what to do as a result of the rise should definitely consider remortgaging. The potential savings are likely to be even greater following the interest rate rise and the monthly savings cannot be ignored.”
