Mortgage gone up already? Rising interest rates are hitting people’s pockets

Rate rise adds to costs

On Thursday, the Bank of England raised interest rates by a quarter of a percentage point. The move was aimed at tackling rising inflation linked to the Iran war.

Higher rates can make mortgages, credit cards and personal loans more expensive, although the impact may take time to reach some borrowers. Savings rates can also improve.

Variable mortgage repayments climb

Peter Gill, 48, runs a small tiling business in Halifax and has a variable-rate mortgage. He is among about 1.3 million Britons with this type of deal. Gill expects his monthly repayments to rise by roughly £45 after the Bank’s increase, and worries they could go higher. Food, gas and electricity bills have also risen for his family, while he says he works about six and a half days a week to protect them from the strain.

Refixing brings a sharp increase

Most UK mortgage holders have fixed-rate deals, but those borrowers may still face higher costs when they renew. Fixed rates had already risen amid market expectations that rates would need to increase to address inflation.

Dawn Fazackerley-King, a mother of two, is moving from a five-year fixed deal at 1.4%, taken out in January 2022, to a two-year deal at 5.69%. She expects the change to add about £200 a month, and says she and her partner, who both work full time, cannot take on extra work.

Debt leaves little room

Ben Thomas, 41, from Shropshire, retrained as a paramedic after leaving his chartered-accountant career during the Covid pandemic following a mental health crisis. He has arranged to pause interest on most of his debt, but charges continue on about £2,000 of credit-card debt.

Thomas and his wife pay around £300 a month towards overall debt repayments and £760 on their mortgage. They have also faced higher food and energy bills, and he is concerned borrowing costs could raise his repayments further.