The interest rate has been increased for the first time since 2007.
Whilst the change will not impact those with fixed rate mortgages, it will mean a slight increase in monthly payments for those who are currently on a standard variable rate.
However, the threat of a rise in interest didn’t seem to deter first time buyers from trying to access the property ladder. Research from Yorkshire Building Society (YBS) indicates that less than 1 in 10 (8%) were put off house hunting by the prospect of an interest rate rise.
Commenting on the hopeful picture that this figure paints was Mike Sims, senior mortgage manager at YBS, had said before the increase was announced: “The mortgage market has been in unchartered territory for many years now and even with the prospect of rates rising it’s pleasing to see that many aspiring home owners still believe owning their own home is in reach.”
Sharing his views on the impact of the rate rise was Robert Gardner, chief economist at Nationwide who acknowledged that whilst an increase wouldn’t have a significant effect on borrower payments, it was unlikely to be welcomed.
He commented: “A 0.25% increase in rates is likely to have a modest impact on most borrowers who are on variable rates. For example, on the average mortgage, an increase of 0.25% would increase monthly payments by £15 to £665, equivalent to £180 per year.
“That’s not to say that the rise will be welcome news for many borrowers. Household budgets are under pressure from the fact that wages have not been rising as fast as the cost of living. Indeed, in real terms after adjusting for inflation, wage rates are still at levels prevailing in 2005.”
Author: Georgia Hunt