How much mortgage payments could soar for millions as expert urges 'get on the ladder now'
Interest rates are up and your mortgage payments are at a risk of increasing as a result, if you're on a standard variable rate or a tracker mortgage then your monthly payments are definitely increasing.
The Bank of England voted overwhelmingly this week (5 November) to put the rate up from 3.75 percent to four percent, with only one member voting differently as they supported raising interest rates even higher to 4.25 percent.
It's a sign of the times and of things to come, as the rate is expected to rise further in the coming year with concerns that by November 2027 it might have increased to five percent.
Adam Parker, founder of Muswell Rose, told LADbible that the interest rate rise is 'not idea' but is 'nowhere near the shock of a few years ago' when it increased a lot rather than rising gradually.
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He pointed out that for Brits currently on a fixed rate mortgage they won't see a change at the moment, but for those on variable or tracker rates it'll go up, and for people who are looking at re-mortgaging soon when their deal expires costs will be going up.
"About £15 a month for every £100,000 borrowed over 25 years"
Parker explained that the interest rate rise of 0.25 percent will put extra on people's bills if they're not on a fixed deal.
"For tracker and variable rate borrowers, payments will go up roughly in line with the rise. About £14 to £15 a month for every £100,000 borrowed over 25 years, so around £30 a month on a £200,000 mortgage," he explained.
"For everyone else, it’s less clear-cut. Lenders knew this was coming, so many have already priced it in. I’ve already heard of a few lenders putting their rates up by more than the base rate rise, and others actually cutting their rates below where they were before.
"What matters is the rate your lender actually offers, not the headline figure, which is why it pays to shop around."
Yep, unfortunately if you're looking for a fixed deal now some places have increased their rates even higher.
If someone on a £200,000 mortgage is on a 4.5 percent deal and ends up on one at six percent that's closer to a £177 a month increase in your payments.
"Get on the ladder now, or accept you probably never will"
James Buckley-Thorp, Founder of Atlian AI, suggested that even if monthly payments are going up this is a 'buyer's market' and people looking to get a house have more choice.
"Here’s what the market won’t admit: you can’t have cheap rates and plenty of choice at the same time," he said, saying that with more properties being sold there were more options to buy a home and that was good for buyers.
When it came to the increase in monthly payments from interest rates he suggested that 'knocking a few thousand off the asking price more than pays for that', and that first-time buyers have some 'leverage' in the market.
He said: "When the market is full of property, sellers have to listen to sensible offers.
"First-time buyers with a mortgage in principle are the people sellers want most, and they should be offering low."
As for whether or not it's the right time to buy, he suggested figuring out what you're comfortable with.
"You either have the nerve to step onto the ladder, or you’re comfortable renting and handing that risk to someone else," he argued.
"Both are fine. But waiting for low rates and lots of supply at the same time is a fantasy. Get on the ladder now, or accept you probably never will."
"Buyers may have more room to negotiate"
This is something Parker echoed in his analysis, saying that many buyers choose to fix their mortgages to insulate against changing rates but the overall house price you were paying that rate on mattered as well.
He suggested that 'prices may soften a little and buyers may have more room to negotiate'.
He said: "If you can get the property cheaper, you need to borrow less, which can bring your monthly payments back to what you expected before the rise.
"If your finances are ready and you could still manage if rates rose again, there’s no reason to sit on the sidelines."
Joe Harker
