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Two million homeowners braced for biggest interest rate rise in 27 years

Bank of England expected to announce sixth consecutive increase to the Bank Rate.

Article originally published by The Telegraph. Hargreaves Lansdown is not responsible for its content or accuracy and may not share the author's views. News and research are not personal recommendations to deal. All investments can fall in value so you could get back less than you invest.

Millions of homeowners are braced for the biggest mortgage rate rise in nearly 30 years, with repayments increasing by thousands of pounds a year.

The Bank of England is expected to announce a sixth consecutive increase to the Bank Rate since December and the largest individual jump for 27 years today, with markets anticipating a rise from 1.25pc to 1.75pc.

Karl Thompson, of the Centre for Economics and Business Research, an analysis firm, said: “A half point rise is what we are expecting, which is something we haven’t seen in nearly 30 years. And the key point is that it will be coming on top of a succession of rate rises. We are entering a new era.”

A 0.5 percentage point rise will mean monthly mortgage payments for owners with an average £270,708 property with a 25pc deposit will cost £196 more per month than in November last year, before the Bank began raising rates, according to financial analyst Moneycomms and TotallyMoney, a credit app.

Nearly two million homeowners will be immediately hit by rising costs. Nationally, 1.1 million homeowners are on standard variable rate mortgages and a further 850,000 are on tracker rates, which will jump in response to the Bank Rate.

A homeowner with a £400,000 mortgage on a tracker rate will see their monthly payments jump by £99 overnight if the Bank Rate rises by 0.5 percentage points. A homeowner with a £250,000 variable mortgage would see their monthly costs jump by £66.

Over the course of a year, the 0.5 point rate rise would cost these homeowners an extra £792 and £1,188 and respectively.

The majority (80pc) of mortgaged homeowners will be protected from the immediate effects of the rate rise by their fixed-rate deals, but a third of these will expire in the next two years. These homeowners face having to remortgage at much higher rates than at present.

Andrew Hagger, of Moneycomms, said: “For many, a triple digit increase is inevitable next time their mortgage deal comes up for renewal.”

The rate rise will also hammer demand from new buyers. New first-time buyer affordability will hit its worst level since 2012, according to property website Rightmove.

A 0.5 point increase means monthly mortgage payments for a first-time buyer will jump from £976 to £1,030. This means the share of a first-time buyer’s gross salary needed to cover their mortgage payments would jump from 38pc to 40pc, the highest level for a decade.

This article was written by Melissa Lawford from The Telegraph and was legally licensed through the Industry Dive Content Marketplace. Please direct all licensing questions to legal@industrydive.com.

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    Article originally published by The Telegraph. Hargreaves Lansdown is not responsible for its content or accuracy and may not share the author's views. News and research are not personal recommendations to deal. All investments can fall in value so you could get back less than you invest.

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