Home owners and buy to let landlords facing mortgage cost hike as early as May
Home owners with mortgages in the UK need to be ready for the cost of their loans rising as the Bank of England has signalled two interest rates rises are likely this year.
Last November the Bank raised the cost of borrowing for the first time in more than 10 years from 0.25% to 0.5% and at the time indicated there could be two more increases of 0.25% over three years.
But it now appears there could be an increase as early as May this year and another one in the autumn which are set to affect millions of people with mortgages as the rates standard rates usual rise in line with the Bank and low interest mortgage products could be withdrawn.
Although the Bank’s Monetary Policy Committee has just voted to keep interest rates on hold at 0.5% at their latest meeting it said that rates would need to rise ‘earlier’ than previously forecast and by a ‘somewhat greater extent’ than they thought at their review in November.
Around 8.1 million UK households have a mortgage and of those almost half are on either a standard variable rate or a tracker rate. Interest rates on those types of mortgages would be likely to match any increase in official rates made by the Bank of England.
Experts think the next rate rise could come as soon as May. The next MPC meetings is on 22 March and they believe a rise is unlikely then but it is probably going to be announced on the meeting after that on 10 May.
‘It paves the way for an interest rate hike in May, and we think that the MPC will hike a further two times this year, taking Bank Rate to 1.25%,’ said Paul Hollingsworth, senior UK economist at Capital Economics.