HOMEOWNERS are facing soaring mortgage costs as the Bank of England is primed to hike interest rates to 1.75% today.

The Bank of England is widely expected to increase the base rate of interest by 0.5 percentage points – the biggest hike in 27 years.

Households have been warned of a "Black Thursday" of financial misery today with a triple whammy of rising interest rates, soaring energy bills and runaway inflation.

And anyone on a variable or tracker mortgage will be the first to feel the effects of the increase.

These mortgages are linked to the Bank's base rate – so when it goes up, so do your monthly repayments.

There are around 1.9million homeowners with these mortgages.

The latest hike – the biggest since 1995 – is expected to add £888 a year on to their repayments.

read more in mortgages

We’re saving THOUSANDS on our £385,000 first home with an easy mortgage trick

Urgent warning for mortgage bills as Bank of England set to raise interest rate

That's based on a £250,000 mortgage with a 25-year term, according to figures from broker L&C Mortgages.

But for many people, the impact will be even greater.

The average UK house price shot up 12.8% over the past year to £283,000.

The bigger your mortgage, the more your repayments will go up when interest rates rise.

Most read in Money

PUMP IT UP

Morrisons slashes 6p a litre off petrol as supermarket price war ramps up

CASH BOOST

Exact date people on tax credits will get first half of cost of living payment

FRIGHT MOVE

I'm a builder… these are the horrors people miss when buying a house

STORE SAVINGS

UK's cheapest supermarket for basket of 153 items revealed

Already mortgage rates soared at their fastest pace in a decade in the six months to May.

Typical two-year fixed rates have rocketed by as much as 166% since the start of the year.

And the latest hike heaps more misery on households who have seen interest rates rise from a historic low of 0.1% in November.

According to TotallyMoney, if rates go up to 1.75% it means a typical household on a variable rate mortgage will be paying £196 a month more than they were in November.

That's an extra £2,352 a year.

Andrew Hagger, personal finance expert at Moneycomms, said: "The decision to hike rates for the sixth time since December will make borrowers wince at the thought of yet higher monthly mortgage costs.

"Customers on a fixed rate will avoid immediate financial pain, but for many of them, a triple digit increase in monthly repayments is inevitable next time their mortgage deal comes up for renewal."

Around 75% of mortgage holders are on a fixed rate deal and will not be affected by today's rate hike.

These mortgages let you lock in at a certain interest rate for a set period – this shields you from any rate hikes.

But these homeowners are likely to see their repayments shoot up when their fixed deal comes to an end and they either look for another fixed deal or move onto their provider's Standard Variable Rate (SVR).

According to Moneyfacts, a typical two-year fixed mortgage rate was 2.52% in August 2021 but has risen to 3.95% today.

An average five-year fixed deal is now 4.08%, up from 2.75% a year ago.

Laura Suter, head of personal finance at AJ Bell, said: “Anyone coming to re-mortgage in the next couple of months faces a huge shock in how much their monthly costs are going to rise.

"Someone coming off a two-year fix would have secured their last mortgage when rates were far lower."

What to do now

Mortgage lenders are quick to react when interest rates rise and will usually pull their cheapest deals fairly quickly.

If you are currently on a variable or tracker mortgage rate then it's too late to do anything to beat today's hike unfortunately.

But some experts say that rather than panicking and locking in a rate in the days after the hike, you might be able to get a better deal in a couple of weeks when the market has calmed down.

Either way, locking into a fixed rate deal will give you certainty over your repayments for a set period of time and protect you from future rate hikes.

Shopping around for a mortgage deal yourself can be complicated, but an independent broker will be able to help.

Read More on The Sun

Drivers blown away by proper use for a button you’ll find in EVERY car

Energy bills WILL rise every three months, Ofgem confirms

If you are struggling to meet monthly repayments then extending your mortgage term can make them more affordable – but it will mean you end up paying more interest over the long-term.

First-time buyers should be sure to take advantage of the Lifetime Isa, which gets you a 25% bonus from the government on money you save for a house deposit.

    Source: Read Full Article