The move will have a big impact on homeowners, with the 0.25 per cent difference meaning an increase of £22.26 per month for borrowers on a £150,000 mortgage.
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Naturally, tracker rates are transparent and will move exactly in line with the BoE base rate. However, borrowers on the SVR or discounted rates are more vulnerable and it can take more than a week for all borrowers to be aware of their fate.
Lenders offering fixed mortgage rates have already factored in the rate rise, and fixed rates have risen consistently over the last month, with some offers only lasting a matter of weeks before being withdrawn and replaced by higher priced products.
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Stephen Leonard, Director of Mortgages at Alliance & Leicester, said: “Indications are that the rate may well be at the top end of the curve so borrowers needn’t panic. As the effect of lower energy prices comes into play and inflationary pressures are likely to slow towards the second half of the year, this could lead to rates falling back again.
“First-time buyers should consider locking into a fixed-rate mortgage enabling them to have the security of regular payments, and allowing them to budget at a level they find comfortable and affordable. There are still deals on the market under 5.5 per cent, and borrowers should act quickly if they want one.”
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It is expected that repossessions will increase to 42,700 by 2009 from 17,000 in 2006. Citizens Advice says they were approached for help with 15 per cent more debt problems in January 2007 than in January 2006.
The last interest rate rise took place in January this year and at the time came as something of a surprise to many commentators who expected the BoE to wait before voting on an increase.
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