In anticipation of the upcoming base rate announcement on June 22, financial comparison service TotallyMoney has analysed the potential impact of a 0.25 percentage point increase in the Bank of England base rate on homeowners throughout England.
With calculations provided by personal finance expert Andrew Hagger from Moneycomms, the research sheds light on the potential consequences for mortgage payers if the base rate were to rise from 4.50% to 4.75%.
Alastair Douglas, the CEO of TotallyMoney, urged homeowners to conduct thorough research before committing to any new mortgage offers. He advised seeking the assistance of an independent mortgage broker to explore various options and survey the entire market for the best borrowing opportunities.
Douglas further emphasized the importance of maintaining an updated credit report and ensuring a strong financial standing. Taking these precautions, which are free to implement, could potentially save homeowners thousands of pounds, as lenders tend to reserve the most favourable offers for those with excellent credit scores.
Andrew Hagger expressed the frustration of consumers who expected interest rate hikes to cease by now. Concerns mount as households worry about the added strain on their already struggling finances.
It is crucial to note that the impact of the rate increase will vary for individual borrowers, depending on factors such as their mortgage type and personal circumstances.
For the calculations, the research employed average house prices from just prior to the series of interest rate hikes that commenced in November 2021. Additionally, it assumed borrowers held a variable rate mortgage with a loan-to-value ratio of 75% and a mortgage term of 25 years.
Based on these parameters, the study reveals the average additional monthly costs that homeowners could face across different regions of England in the event of a 0.25 percentage point base rate hike:
- East Midlands: £26
- East of England: £39
- London: £61
- North East: £17
- Yorkshire and the Humber: £22
- North West: £23
- South East: £42
- South West: £36
- West Midlands: £27
These figures highlight the potential financial burden that such a rate increase could impose on homeowners across the country, underscoring the need for careful financial planning and preparation for any adverse consequences.