Households could see their mortgage repayments rise by around £5,000 a year due to high interest rates, experts are warning.
Earlier today, the Bank of England confirmed the country’s base rate would remain at 5.25 per cent for the fifth consecutive time.
The central bank has previously raised rates in an attempt to ease inflation during the cost of living crisis which has been a blow to homeowners and borrowers.
Yesterday, figures from the Office for National Statistics (ONS) revealed that the Consumer Price Index (CPI) rate of inflation for the 12 months eased to 3.4 per cent.
This is the lowest figure for inflation recorded in over two-and-a-half years with many hoping the Bank would cut rates sooner than expected in response.
However, the central bank appears to be keeping the base rate at its current level for the foreseeable future which will result in greater costs for those looking to remortgage.
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Mortgage repayments will go up despite the Bank holding rates
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Speaking to GB News, Greg Marsh, household finance expert and CEO of Nous, said inflation and high interest rates are causing “further pain” for families.
He explained: “Headline inflation has fallen to 3.4 per cent, which is being touted as good news. But it’s not going to feel like that for households.
“Prices are still rising, and have soared by 20 per cent over the last two years. We’re facing another ‘Awful April’, with mobile, broadband, council tax and water bills all rising on the same day.
“Plus – the Bank of England is holding interest rates at 5.25 per cent for the fifth meeting, causing further pain for the 1.1 million households due to remortgage later this year.
“A household with a typical £200,000 mortgage who fixed two years ago and is refinancing today will see their payments increase by just over £400 per month or £5,000 per year. In this climate it’s crucial households aren’t overpaying on their essential bills.”
Prospective homebuyers have been forced to contend with hiked mortgage rates in recent years which has exacerbated the cost of living for many.
Towards the end of 2023, high street lenders began cutting rates in a bid to attract customers ahead of borrowing costs coming down.
However, after a surprise jump in inflation, many banks including Santander raised rates with the expectation that interest rates would now not come down until later in 2024.
Despite interest rates remaining high, experts have highlighted that the Bank of England’s latest pause means “stability” on the housing market.
Adrian MacDiarmid, the head of mortgage lender relations at Barratt Developments, outlined how homeowners can use this latest interest hold to their advantage.
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The Bank of England base rate is at a 15-year high of 5.25 per cent GB NEWSHe said: “With inflation falling again last month, and interest rates being held, there is greater stability for buyers to make decisions about moving home.
“The housing market has seen a good pick-up in sales agreed since the start of this year and spring tends to be a busy time, partly driven by parents wanting to be in their preferred catchment area before the new school year.”
The ONS will announce the CPI inflation rate for the 12 months to March 2024 on April 17.
The Bank of England’s Monetary Policy Committee (MPC) will next meet to discuss potential cuts to interest rate on May 9, 2024.