Thousands of London families face another painful cost-of-living blow in the run up to Christmas tomorrow when mortgage rates are expected to be raised by another half a percentage point to 3.5 per cent.
City economists say that the Bank of England is almost certain to order another sharp rise in borrowing costs at tomorrow’s meeting of its Monetary Policy Committee to rein in inflation currently running at 10.7 per cent.
A half point hike will increase the monthly repayment bill for a typical £250,000 London tracker mortgage with 20 years to run by £65.87 from £1,482.22 to £1,548.09, an annual rise in household costs of £790.
For a larger £300,000 loan the increase is £79.04 from £1,778.66 to £1,857.70.
Those who have taken out a £500,000 mortgage will see a hike of £132.26 from £2,964.44 to £3,096.17.
Only those borrowers with tracker or variable mortgages that move in line with the Bank of England’s interest rate will be initially affected. There are thought to be around 200,000 mortgages with these sorts of deals outstanding in the capital — about 20 per cent of the total.
The majority of mortgages are protected by two or five-year fixed rates.
Yesterday the Bank said about four million mortgage borrowers will see their monthly payments jump over the next year. Those on fixed-rate mortgages face an average payment increase of £3,000 a year, it warned.
People with fixed-rate loans due to expire by the end of 2023 are facing average repayment hikes of about £250 a month as they are forced to move onto a higher interest rate.
Prime Minister Rishi Sunak and Chancellor Jeremy Hunt are facing growing pressure to do more to help homeowners.
Tomorrow’s rate rise will be the ninth consecutive increase by the Bank in a year after it started to raise the cost of finance from 0.1 per cent last December.
According to Moneyfacts, the average two-year fixed rate mortgage rate is today 5.84 per cent while the average five-year fixed deal is 5.66 per cent. Both spiked to well over six per cent after the September mini-Budget but have been steadily subsiding in recent weeks.
