Banks across the country have started to confirm when customers on standard variable rate (SVR) mortgages will see interest rates will go up. The Bank of England (BoE) says it will increase its base rate from 1% to 1.25%.
It is thought that this will affected around two million homeowners. The rate your repayments will increase depends on what type of mortgage you have taken out.
Those on a tracker rate mortgage will see their interest rates go up automatically in line with the BoE rate hike. But lenders are more likely to pass on the full interest rate to someone on a SVR mortgage.
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If you were on a fix or tracker rate which has ended, it is likely you will now be on a SVR type of mortgage deal, Mirror reports. From August 1, Santander said its SVR will rise by 0.25 percentage points but its tracker mortgage products will go up by the same amount from July 1. This includes the Santander follow-on rate (FoR) which will increase to 4.50%.
TSB says the changes for variable rate mortgages for existing customers will take effect on July 9, again by 0.25 percentage points. Barclays has confirmed that customers with an SVR mortgage, will see their rate go up 0.25 percentage points from August.
Nationwide says tracker mortgages will go up by the same amount from August 1. But it didn't confirm when changes to SVR products will be made.
HSBC and First Direct customers will see their tracker mortgages rise from June 17. No changes for its SVR mortgages have been confirmed at this time.
Lloyds Banking Group - which owns Lloyds Bank, Halifax, Bank of Scotland - says it is still reviewing its rates.
Sarah Pennells, consumer finance specialist at Royal London, explained how someone with a £200,000 25-year repayment mortgage will pay an extra £27 a month as a result of the rates hike. This adds up to £324 over the year. While some homeowners will be able to afford that, others will undoubtedly struggle, especially as other costs spiral.
"A mortgage broker would be able to recommend the best mortgage for you as it’s not necessarily going to be the one with the cheapest headline rate of interest."
It is important to remember that this is the fifth consecutive BoE rise in a row - so the actual price hike will be hundreds of pounds more compared to rates of 0.1% last year. However, interest rates are still considered low by historic standards.
How to compare mortgage deals
It's important to remember to factor in any other costs and check if there is an early exit fee associated with your current deal when thinking about making a switch.
Sadly, banks and lenders have slowly been increasing the rates of their fixed deals for several months now in anticipation of interest rate hikes. But it is still possible to save thousands of pounds each year.
Laura Suter, head of personal finance at AJ Bell, said: "The current average variable rate mortgage is 2.8%, according to the Bank of England, which will rise to 3.05% after today’s increase. However, the top two-year fix is 2.6%, meaning that at £100,000 of borrowing a homeowner could still save £276 a year by switching.
"On a £250,000 mortgage that would equal a £696 a year saving and on £400,000 of borrowing a homeowner could save £1,116 a year by switching."
