£5,000 annual increase in the average cost of a mortgage for some borrowers

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Homeowners whose mortgages directly track the base rate face a total average annual bill hike of around £5,000, following 12 consecutive hikes in the Bank of England base rate.

The average monthly tracker rate mortgage payment will increase by £23.71 following Thursday’s base rate hike, according to calculations from UK Finance.

Homeowners on a standard variable rate (SVR) mortgage meanwhile will pay around £15.14 more per month typically, assuming that the lender passes the full base rate rise on to the borrower.

Over the course of the series of rate hikes, which have taken the base rate from 0.1% to 4.5%, the average monthly tracker mortgage payment has increased by £417.36, according to UK Finance’s calculations.

This adds up to around £5,008 more per year for homeowners on trackers.

The average SVR payment has jumped by a total of £266.48 per month, which adds up to around £3,198 more annually.

Around four-fifths (81%) of outstanding mortgages are fixed-rate deals. Mortgage borrowers in this group will not feel the immediate impact of base rate rises until their deal ends.

“The average five-year fixed mortgage rate is lower than the two-year fixed, which may encourage prospective borrowers to lock down their rate for longer.

“However, fixed mortgage rates could be unpredictable in the months to come, so some borrowers may even sit on their revert rate waiting for cheaper deals to surface.

“Whether fixed rates are destined to remain volatile or not, there is still an incentive for borrowers to fix, as the consecutive base rate rises have pushed the average standard variable rate to its highest point since 2007.”

The average SVR was already sitting at 7.37%, before Thursday’s base rate announcement, according to Moneyfacts’ figures.

Earlier this week, Skipton Building Society unveiled a new zero deposit mortgage to help renters make the jump onto the property ladder.

Tenants need to demonstrate a strong track record of paying their rent, with evidence of a minimum of 12 months of rental history, as well as passing affordability checks, to get the deal.

Skipton also said on Thursday that it will pass on the 0.25 percentage point base rate hike in full to its variable rate savers.

However, it said it will not pass on the 0.25 percentage point base rate rise to its mortgage customers on SVR or MVR (mortgage variable rate) deals.

Charlotte Harrison, Skipton’s CEO of home financing, said: “We know today’s increase is good news for our savers, but for the millions of people who are due to come off a fixed-rate mortgage product in the next few months and potentially onto an SVR, a base rate increase is unwelcome news.

“And to those people I can share that Skipton will not be increasing our MVR or SVR as a result of today’s anticipated announcement.

“This means for the bulk of our mortgage customers – those not on base rate tracker-linked products – there will be no increases to their payments.”

Chris Irwin, director of savings at Yorkshire Building Society, said: “Our decision today to pass on the full bank base rate rise to our accounts continues to reflect our mutual ethos of putting our members first.”

The Treasury Committee has been encouraging providers to boost their savings rates, as the base rate has risen, with committee chair Harriett Baldwin saying customers should “continue to vote with their feet and find better offerings”.

Rising mortgage rates have also been affecting rents, as landlords see their costs increase.

Property website Rightmove recently reported that the average rent being asked outside London had reached a new record high of £1,190 per month.

Within London, average asking rents had surpassed £2,500 for the first time to reach a new record of £2,501 per month in the first quarter of 2023, Rightmove said.

Mark Manning, managing director at Northern Estate Agencies Group said: “Everybody expected another rate rise today, but I hope that this is the last one and things begin to level off.

“Up until now, the housing market has continued to perform well because mortgages are still affordable, however, I think this will change if rates go above 5%.”

Frances McDonald, director of residential research at estate agent Savills said: “Local authorities where agreed sales remain above 2019 levels include a number in Scotland (Aberdeenshire, Dundee City and East Lothian) and the North (Ribble Valley, Northumberland and Burnley) where house price-to-income ratios tend to be lower and so higher mortgage rates have had less of an impact on affordability and therefore activity.

“But the less mortgage-dependent, high-value markets of Kensington and Chelsea and Westminster have also seen activity exceed pre-pandemic levels so far this year as more demand has returned to these central London boroughs.”

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