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.
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.
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.
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.