Homeowners to face '£1,500 mortgage rise' as 'considerable pressure’ warning issued

Detailed summary

Homeowners are being warned of higher mortgage costs after the Bank of England raised interest rates

Homeowners are being urged to check their mortgage deals and explore their options after the Bank of England warned that rising borrowing costs could put further pressure on household finances.

Millions of borrowers could feel the effects as higher interest rates feed through to mortgage repayments, particularly those coming to the end of fixed-rate deals. The Bank of England's latest report suggests average annual mortgage payments could be around £1,500 higher by the end of 2029 than before the recent rise in energy prices.

The warning comes after the bank increased the base rate to 4 per cent on November 5, following concerns about inflation and rising energy costs. Its November Monetary Policy Report says average annual mortgage payments are projected to be around £700 higher by the end of 2029 than forecast in July, and £1,500 higher than before the conflict in the Middle East.

Chris Hewitson, VP of Credit and Data at Selina Finance, said: "Rising mortgage rates can put considerable pressure on household finances, particularly for homeowners who secured their existing deal when interest rates were much lower."

He urged borrowers to check when their current agreement expires and whether early repayment charges apply before making any decisions. "Planning ahead is particularly important because homeowners approaching the end of a fixed-rate deal may be able to secure a new rate several months before their current agreement finishes," he added.

Borrowers may be able to arrange a new deal with their existing lender, but should compare this with offers elsewhere rather than assuming it is the cheapest option. Fees and the total cost over the mortgage term also need to be considered, not just the headline interest rate.

Another possibility is extending the mortgage term to reduce monthly repayments, although this generally means paying more interest overall.

He also advised homeowners to consider whether occasional overpayments could be affordable, as reducing the…

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