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Mortgage tracker rates creep up: frogs are boiling

  • The rates on base rate tracker mortgages have risen in response to the Bank of England base rate rise. The average two-year variable tracker is now at 1.97%, and the cheapest at 1.24% - according to Moneyfacts.
  • It’s one of a number of stealthy, gradual price rises hitting consumers. We need to wake up to the risks or we could end up in financial hot water.

The Moneyfacts data is available here.

Sarah Coles, Personal Finance Analyst, Hargreaves Lansdown:

"The idea of boiling a frog comes from the widely told anecdote of a 19th century experiment, where scientists put a frog in boiling water and it jumped out. They then were said to have put a frog in cold water, and gradually heated it. The frog didn’t notice the temperature rise, stayed in, and suffered fatal consequences. Amphibian fans will be pleased to know the tale is purely apocryphal – the frog will always hop out. However, it still stands as a useful metaphor for our finances at the moment."

"Prices on every side are very gradually rising. As a result of the rate rise, you might be spending £15 extra a month on the mortgage. It doesn’t feel particularly difficult to handle, but at the same time prices are rising across the board. You might not be worried by grocery bills going up £10 a month, a household bill rising £7, or council tax by £5 either. However, when you look at all these price rises together, they start to add up. Over the course of a year, these small, gradual price rises are adding hundreds of pounds to our outgoings. If we haven’t changed our behaviour to take account of the rises, we could suddenly find ourselves with a significant shortfall, and no idea how it arose."

"Rather than just assuming we can afford to take price hikes on the chin, we need to take them seriously whenever they happen. As mortgage rates rise, it’s worth checking we have a competitive deal, and consider moving. Likewise when utility companies hike prices, we need to take the opportunity to shop around. Like the canny frog, we shouldn’t just stay put while our finances overheat, we need to get out of uncompetitive deals, and into something far more financially comfortable."