For the first time in more than ten years, the Bank of England have raised interest rates. But, there is no need to panic, the new rate of 0.5% still remains the second lowest rate on record.While a number of banks and building societies have already announced that they will pass on the rate increase to borrowers, the impact of a rise will be minimal. UK Finance report that over the last two years, over 90% of new mortgage and remortgage loans have been on fixed rate deals. Over half of all outstanding mortgage loans are now on fixed rate deals.
For the 5 million borrowers on variable rate mortgages, some increase in their monthly mortgage is to be expected. The Nationwide estimate that the 0.25% rise will increase the monthly mortgage bill for homeowners with a £175,000 mortgage on their base mortgage rate deal by £22.
However, the introduction of the Mortgage Market Review in 2014 means that borrowers are more prepared for a rise than they might have been in the past. UK Finance estimate that, of mortgages lent since 2015, 92% were stress tested for an interest rate of at least 3% above their current rate.
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