Homeowners face mortgage bill rises despite Bank of England holding interest rates at 0.5%
Borrowers may be breathing a sigh of relief but they may have already been hit by an interest hike
HOMEOWNERS face mortgage rate rises despite the Bank of England keeping rates at 0.5 per cent.
Experts had predicted that the base rate would rise by 0.25 per cent to 0.75 per cent.
Ahead of the announcement homeowners looking to lock in on fixed rate mortgages have been hit with bigger bills as lenders put up rates in anticipation of today's announcement.
Mark Carney, governor of the Bank of England, hinted in February that the base rate was likely to go up this month.
David Blake from Which? said: "The base rate may have remained firm, but rock-bottom mortgage rates are slowly becoming a thing of the past.
"In anticipation of further rate rises, lenders across the market have already started to preemptively increase their mortgage rates, much to the frustration of many homeowners."
Experts at also warned that 27 providers have increased their rates in April, and some of them raised them twice.
This has brought the average two-year fixed mortgage rate up to 2.52 per cent today, from 2.30 per cent earlier this month.
In April, Halifax raised the rate of one fixed term rate from 2.48 per cent to 2.84 per cent, while Santander hiked interest rates from 1.89 per cent to 2.04 per cent.
The Bank of England's Monetary Policy Committee voted by seven to two to keep the base rate the same.
It's used by banks and building societies to calculate the interest rates on mortgages and savings but they don't have to follow it.
And it's bad news for savers who aren't going to see an interest boost on their nest eggs.
In 2014, MP Pat McFadden dubbed the governor an "unreliable boyfriend" after falsely hinting that rates would rise.
Tom Stevenson from Fidelity said: "Until a few weeks ago, a further quarter point rate hike to 0.75 per cent looked almost guaranteed.
"But very weak UK GDP growth figures and fast-retreating inflation has seen a rapid reversal of the Old Lady’s increasingly unhelpful forward guidance.
"The Bank of England has marched investors up to the top of the hill only to march them back down again."
What does it mean for borrowers?
If you're on a fixed term rate then the rise won't change your locked in payments until you come up to renew it. But for those on a variable rate or tracker it means rates should remain low.
Even so, Charlotte Nelson from MoneyFacts warned now might be the time to lock in to a fixed-rate mortgage.
She said: "Despite fixed rates rising, borrowers sitting on their variable rate will still be significantly better off if they switch to a fixed rate deal.
"In fact, by switching from the average SVR of 4.73 per cent to the average five-year fixed rate, they would be around £199 a month or £2,386 a year better off."
Mark Carney previously said there will be "something more than three" low rises over the next few years.
And borrowers shouldn't be complacent because other factors affect interest rate hikes, like Libor rates, which is how much lenders pay to borrow from each other.
Analysis for the Sun Online found that if all the major lenders opted to increase their Standard Variable Rates by 0.25 per cent, customers could be forking out an extra £230 a month on their mortgage.
This average is based on if the top 11 UK mortgage lenders raised the rates on their variable rate deals by another 0.25 per cent.
If Yorkshire Building Society pushed up rates, customers could see their monthly repayments jump by £21.98 a month - from £876.01 to £897.99.
Santander customers will be worst hit with an extra £20.56 a month. Their new payments will be £791.76 a month up from £771.20.
One borrower reveals what a hike could mean for her SVR mortgage
HEATHER Dunk, 27, from Manchester, is worried about how an interest rate hike could increase her monthly mortgage payments.
Heather and her husband Nick, 32, switched their £58,000 fixed-rate mortgage to an SVR one with Lloyds back in October last year.
The couple plan to move their family-of-three soon and didn't want to pay any early-exit fees often charged when you leave a fixed-rate mortgage before the agreed time.
But it meant that they were immediately hit by high interest rates after the Bank of England raised them for the first time in a decade in November last year.
They currently pay 3.99 per cent interest but a 0.25 per cent rate rise will bring the amount they pay up to 4.14 per cent.
"Hopefully it won't impact our budget for a new place," Heather told the Sun Online.
"But bear in mind, our monthly repayments have already jumped from £300 a month to £350 since we switched mortgages and that extra £50 is going on the interest.
"We're not getting any more equity on the house.
"I'm more worried about the rate's we'll get when we do move.
"We want to go back to a fixed-rate mortgage when we've moved but if the interest rates have gone up then our payments will be more and we won't be owning any more of our home."
What does it mean for savers?
Savers are still missing out as they won't see a much needed boost to the interest rates this time around.
Ideally, if rates went up, banks would pass the full 0.25 per cent on but the Sun Online revealed that only one in 10 banks passed on the savings rates boost to customers.
Britain's savers are said to be losing out on £4million a day thanks to the penny-pinching banks.
We've put together an example of what could happen to your savings if the base rate went up, and the banks followed.
Even so, how much more you'll earn in interest with the potential boost still isn't great.
On £1,000 worth of savings in an easy access account with the top 11 banks, you'll earn an extra £2.51 - or a maximum £2.53 after a year.
On savings worth £5,000 you'll be able to earn an extra £10.12 to £12.65.
With Virgin Money, the interest you earn on your savings will increase by £12.65, from £60.33 to £72.98.
But with Yorkshire Building Society, you'll only accrue £72.98 up from £62.86 - which is only an extra £10.12.
What happened last time there was a rise?
The Bank of England decided to raise the rate in November last year, to try to curb inflation by dampening demand in the economy by making the cost of borrowing more expensive.
What did your mortgage provider do last time?
JUST minutes after the rise in interest rates was announced some banks began announcing increases on their mortgage rates.
Lloyds/Halifax: Accounts that track the base rate went up by 0.25 per cent from Nov 3.
Nationwide: Some accounts went up by 0.25 per cent from Dec 1.
NatWest/RBS: Accounts that track the base rate went up by 0.25 per cent from today.
Santander: Accounts that track the base rate went up by 0.25 per cent from Dec 1.
TSB: A rise of 0.15 per cent from Dec 1 on variable rate savings products.
Yorkshire Building Society: A rise of 0.25 per cent on variable savings accounts from Dec 14.
Barclays: Variable mortgages rose by 0.25 per cent from December 1.
First Direct: It took time to review its variable rate products with its tracker mortgages rising by 0.25 per cent.
On the news of the interest rate cut the pound dropped 1.5 per cent against the euro to 1.257. It also fell by almost 1 per cent against the dollar.
After November's rate hike, based on a £150,000 mortgage over 20 years, customers on its Base Rate Mortgage will be paying £794 a month - an extra £18 a month or £216 a year.
On the same basis, those on the Standard Mortgage deal now pay £908 a month - an increase of £19 a month and £228 annually.
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Rates have been at a record lows for more than 10 years following the credit crunch, with the Bank using cheap borrowing as a way to stimulate the economy.
But savers have had a tough time of it, with low rates reflected in dismal returns on their savings.
Some money charities had warned the Bank against rising rates, with concerns that even a slight increase in the cost of borrowing could be too much for some households.
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